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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission File No. 0-8841
THE PIONEER GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-5657669
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
60 State Street, Boston, Massachusetts 02109
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code: (617) 742-7825
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
Based on the last sale price of the Registrant's Common Stock on the
Nasdaq National Market $27.875 on March 25, 1996, the aggregate market value of
the shares of voting stock held by non-affiliates of the Registrant on that date
was $573,901,288.
As of March 25, 1996, 24,947,173 shares of the Registrant's
Common Stock, $0.10 par value, were outstanding.
Documents Incorporated by Reference
(1) Portions of the 1995 Annual Report to Stockholders are incorporated by
reference into Parts I, II and IV (as indicated in such parts).
(2) Certain information called for by Part III (as indicated therein) is
incorporated from the Registrant's definitive proxy materials for use
in connection with the 1996 Annual Meeting of Stockholders.
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PART I
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ITEM 1. BUSINESS.
OVERVIEW
FINANCIAL SERVICES. The Pioneer Group, Inc., a corporation organized
under the laws of the State of Delaware in 1956 (the "Company"), and its
wholly owned subsidiaries, are engaged in four lines of financial services
businesses in the United States: (i) investment manager to 29 open-end U.S.
registered investment companies and one closed-end U.S. registered investment
company (collectively, "mutual funds"), including eight mutual funds sold in
connection with the Pioneer Variable Contracts Trust, which was introduced in
1995, and seven institutional accounts, (ii) distributor of shares of open-end
mutual funds, (iii) venture capital investor and manager, and (iv) shareholder
servicing agent for mutual funds. Through a recently created subsidiary, the
Company also provides global real estate advisory services to institutions and
corporations.
The Company's international financial services businesses include investment
operations in: (i) Warsaw, Poland, where the Company manages and distributes
units of three mutual funds, owns 50% of a unitholder servicing agent and
manages an institutional venture capital fund, (ii) Dublin, Ireland, where the
Company distributes shares of, manages and services three offshore investment
funds, sold primarily in Western Europe, and (iii) Moscow, Russia, where the
Company provides financial services, including investment advisory, investment
banking and brokerage services, and where the Company owns 51% of the First
Voucher Fund, the largest Russian voucher investment fund. In addition, the
Company has investment operations in the Czech Republic and has invested in
investment management operations in India and Taiwan.
NATURAL RESOURCE DEVELOPMENT. The Company's indirect wholly owned
subsidiary, Pioneer Goldfields Limited ("Pioneer Goldfields"), conducts mining
and exploration activities in the Republic of Ghana and exploration activities
elsewhere in Africa. Pioneer Goldfields' principal asset is its ownership of 90%
of the outstanding shares of Teberebie Goldfields Limited, which operates a gold
mine in the western region of the Republic of Ghana. The Company also
participates in several natural resource development ventures in Russia,
including a project pursuing the development of timber production in the Russian
Far East, in which the Company has a 71% direct interest and a 3% indirect
interest.
FINANCIAL SERVICES
MANAGEMENT ACTIVITIES
The Company's wholly owned subsidiary, Pioneering Management
Corporation ("Pioneering Management"), serves as investment manager to 29
domestic open-end mutual funds, consisting of six
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growth portfolios, five international growth portfolios, six growth and income
portfolios, six income portfolios, two tax-free income portfolios, three money
market portfolios and one balanced portfolio. These portfolios include the
Pioneer Small Company Fund and eight portfolios of the Pioneer Variable
Contracts Trust, each of which commenced operations in 1995. All of such
open-end mutual funds (hereinafter referred to collectively as the "Funds") are
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
At March 1, 1996, the Funds had aggregate net assets with a market
value of approximately $13.3 billion. In managing such assets, Pioneering
Management employs 109 persons, including 14 fund managers and 35 investment
analysts and support staff.
Management Contracts with the Funds. Pioneering Management manages each
Fund pursuant to management contracts. Each management contract is renewable
annually by vote of either the Fund's Board (including a majority of members who
are not "interested persons" as defined under the 1940 Act) or the Fund's
shareholders. All management contracts terminate if assigned and may be
terminated by either party without penalty on 60 days' written notice. The
management contracts for the Funds (other than Funds which were established in
1995 or Funds which recently submitted their management contract to shareholders
for approval) were all renewed for an additional year in 1995. Under these
contracts, is authorized in its discretion to buy and sell
securities for the accounts of the Funds, subject to certain limitations. In
addition, the management contracts between the Funds and Pioneering Management
define the ordinary operating expenses to be assumed by each.
As compensation for its management services, Pioneering Management receives
management fees from the Funds which range from 0.40% to 1.25% per year of
average daily net assets depending on the Fund. One of the Funds has a
management fee which is adjusted based upon the Fund's performance relative to
the performance of an established index (a "performance fee"). Two additional
Funds will implement performance fees in May 1996, assuming Fund shareholders
approve the new fee arrangement. For 1993, 1994 and 1995, Pioneering Management
received revenues from management fees from the Funds and Pioneer Interest
Shares (see below) of approximately $36 million, $47 million and $54 million,
respectively. On an interim basis, Pioneering Management has agreed not to
impose a portion of its management fees and to make other arrangements, if
necessary, to limit operating expenses of selected Funds. Pursuant to this
policy, Pioneering Management limited management fees or otherwise incurred
expenses of approximately $2.0 million, $2.1 million and $3.6 million pursuant
to expense limitation agreements with selected Funds during 1993, 1994 and
1995, respectively. Revenues from Pioneer II, the largest Fund, were
approximately $30 million, $31 million and $32 million in 1993, 1994 and 1995,
respectively. Revenues from Pioneer Fund, the next largest Fund, were
approximately $14 million, $15 million and $16 million in 1993, 1994 and 1995,
respectively.
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OTHER MANAGEMENT ACTIVITIES
Pioneer Interest Shares. Pioneering Management also acts as investment
manager to Pioneer Interest Shares, Inc., a closed-end mutual fund ("Pioneer
Interest Shares"), the shares of which are listed on the New York Stock
Exchange. At March 1, 1996, Pioneer Interest Shares had total net assets with a
market value of approximately $100 million.
Institutional Accounts. In addition, Pioneering Management acts as an
investment manager to four private institutional accounts, acts as a subadvisor
to two Luxembourg registered global funds marketed by an independent third
party, and acts as a subadvisor to one of a series of portfolios utilized as
funding vehicles for a variable life insurance fund (hereinafter referred to
collectively as the "Institutional Accounts"). The Institutional Accounts had
aggregate total net assets with a market value of approximately $691 million at
March 1, 1996.
Polish Funds. In 1992, subsidiaries of the Company organized and began
distributing Pioneer First Polish Trust Fund (the "First Polish Fund"), the
first mutual fund in Poland, and a related joint venture unitholder services
business, Financial Services Limited. In 1995, two additional series of the
First Polish Fund, Pioneer Aggressive Investment Trust Fund (the "Aggressive
Investment Fund") and Pioneer Interest Bearing Securities Trust (the "Interest
Bearing Fund"), began operations. Pioneer First Polish Trust Fund Joint Stock
Company SA ("Pioneer First Polish") serves as an investment manager and
distributor of shares of the First Polish Fund, Aggressive Investment Fund and
Interest Bearing Fund (collectively, the "Polish Funds"). As compensation for
its management services, Pioneer First Polish receives management fees of 2.00%
per annum of average daily net assets, excluding any assets invested in the
Company's Funds. At December 31, 1995, Pioneer First Polish employed 90
full-time persons, including management and support staff. Pioneer First Polish
is a wholly owned subsidiary of Pioneer International Corporation ("Pioneer
International"), which, in turn, is a wholly owned subsidiary of the Company. At
March 1, 1996, the Polish Funds had net assets with a market value of
approximately $314 million. Sales of units of the Polish Funds were $429
million, $734 million and $21 million in 1993, 1994 and 1995, respectively.
Irish Offshore Funds. In 1995, subsidiaries of the Company organized
three offshore funds incorporated under the laws of the Republic of Ireland,
Pioneer Global Equity Fund Plc, Pioneer Global Bond Fund Plc and Pioneer DM
Cashfonds Plc (collectively, the "Irish Funds"). Pioneer Management (Ireland)
Limited ("Pioneer Ireland"), a wholly-owned subsidiary of the Company, serves as
investment adviser, distributor and shareholder servicing agent of the Irish
Funds. The Irish Funds are currently sold in Germany and Austria, but eventually
will be sold in other foreign markets. Pioneering Management serves as a
subadvisor for the Irish Funds. As compensation for its advisory services,
Pioneer Ireland receives management fees from Pioneer Global Equity Fund Plc,
Pioneer Global Bond Fund Plc and Pioneer DM Cashfonds Plc of 1.25%, 0.85% and
0.60% of average daily net assets, respectively. Pioneering Management receives
a portion (not to exceed 75%) of the management fee paid to Pioneer Ireland. At
March 1, 1996, the Irish Funds had aggregate net assets with a market value of
approximately $10 million.
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India Fund. In 1994, subsidiaries of the Company organized Pioneer
India Fund (the "India Fund"). Pioneering Management serves as the investment
manager of the India Fund, and for such services receives a fee equal to 1.25%
per annum of the India Fund's average daily net assets. ITI Pioneer AMC Ltd.
("ITI Pioneer"), an Indian company of which Pioneering Management owns 45%,
Investment Trust of India Limited, an Indian corporation, owns 49%, and the
employees of ITI Pioneer own 6%, serves as subadvisor for the India Fund, for
which it receives fees ranging from 0.10% to 0.60% of the India Fund's average
gross assets invested in India's securities markets. At March 1, 1996, the
India Fund had net assets with a market value of approximately $25 million.
In addition to serving as subadvisor to the India Fund, ITI Pioneer also serves
as investment adviser to four private sector mutual funds for Indian citizens.
These funds had aggregate net assets with a market value of approximately
$116 million at March 1, 1996.
Additional Information. For more information on assets under management
and sales of mutual fund shares for the five years ended December 31, 1995 and
other industry segment information for the three years ended December 31, 1995,
see "Assets Under Management," "Sales of Mutual Fund Shares" and Note 15 --
Financial Information by Business Segment included under Notes to Consolidated
Financial Statements in the 1995 Annual Report to Stockholders (the "1995 Annual
Report"), which information is incorporated herein by reference.
On December 31, 1993, the Company acquired all of Mutual of Omaha Fund
Management Company ("FMC"), the investment management subsidiary of Mutual of
Omaha Insurance Company ("MOIC"). The purchase price for the shares of FMC and
related consulting and non-competition agreements was $23.5 million. In
addition, the Company may be required to pay to MOIC an additional amount of up
to $3.0 million in 1996 in the event that certain asset targets are met. The
Company does not believe, however, that the asset target levels will be reached
and that, as a result, the Company will not be obligated to make any further
payments to MOIC.
DISTRIBUTION OF FUND SHARES
The Company's indirect wholly-owned subsidiary, Pioneer Funds
Distributor, Inc. ("Pioneer Distributor"), acts as principal underwriter and
distributor of the shares of the Funds. In 1995, Pioneer Distributor sold shares
of the Funds with an aggregate offering price of $1.6 billion, including Class A
Shares (as defined below) with an aggregate offering price of $1.1 billion,
Class B Shares (as defined below) with an aggregate offering price of $423
million and shares of Pioneer Variable Contracts Trust with an aggregate
offering price of $28 million. In connection therewith, Pioneer Distributor
received aggregate commissions of $58.7 million, of which $53.1 million was
reallowed to approximately 1,600 independent broker-dealers throughout the
United States and in several foreign countries. In 1994, Pioneer Distributor
received aggregate commissions of $48.1 million, of which $42.5 million was
reallowed to broker-dealers. In 1993, Pioneer Distributor received aggregate
commissions of $38.4 million, of which $34.0 million was reallowed to
broker-dealers. One broker-dealer was responsible for approximately 7% of sales
in 1995 and 11% of sales in 1994.
Underwriting Contracts. Pioneer Distributor provides its underwriting
and distribution services pursuant to underwriting contracts, which are
substantially identical, with each of the Funds. These one-year contracts are
renewable annually by vote of the Fund's Board of Trustees (including a majority
of those Trustees who are not "interested persons" as defined under the 1940
Act) or shareholders. Each contract terminates if
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assigned and may be terminated by either party on 60 days' written notice
without penalty. The underwriting contracts for each of the Funds (other than
the Funds which were established in 1995) were all renewed for an additional
year in 1995.
Sales Charges. Generally, purchasers of shares of the Funds pay a sales
charge which is the difference between the offering price of the shares and
the net asset value of the shares, and which varies generally as a percentage
of the offering price. These are referred to as front-end load shares ("Class A
Shares"). Sales charges on Class A Shares range from zero to 5.75% depending on
the Fund and the amount invested. The Company also offers a multi-class share
structure for certain of the Funds (the "Multi-Class Funds") pursuant to which
the Multi-Class Funds offer both the traditional front-end load shares, or
Class A Shares, and two classes of back-end load shares ("Class B Shares" and
"Class C Shares"). On Class B Shares, the investor does not pay any sales
charge unless it redeems before the expiration of the minimum holding period,
which ranges from three to six years. These early redemptions are subject to a
contingent deferred sales charge (a "CDSC"), which ranges from 2.0% to 4.0%. An
investment by any one account in Class B Shares is generally limited to
$250,000. On Class C Shares, the investor does not pay any sales charge unless
it redeems within one year of purchase. These early redemptions are subject to
a CDSC of 1.0%. The Company began offering Class B Shares in April 1994 and
Class C Shares in January 1996.
With respect to sales of Class A Shares, Pioneer Distributor may, in
its discretion, pay a commission to broker-dealers who initiate and are
responsible for sales of $1 million but less than $50 million, ranging from
0.10% to 1.0%, depending on the Fund, and the amount of the sale. Certain
purchases not subject to an initial sales charge may be subject to a CDSC
ranging from 0.10% to 1.0%, depending on the Fund, in the event of certain
redemption transactions within one year. With respect to sales of Class B
Shares, Pioneer Distributor will pay commissions to broker-dealers related to
sales and service of such shares ranging from 2% to 4% of the sales transaction
amount (including a services fee of 0.25% for the first year). With respect to
sales of Class C Shares, Pioneer Distributor will pay commissions to
broker-dealers related to sales and service of such shares of 1% of the sales
transaction amount (including a services fee of 0.25% for the first year).
During 1994 and 1995, in connection with sales of Class B Shares, Pioneer
Distributor paid commissions to broker-dealers of $4.7 million and $14.9
million, respectively.
Most of the sales charge on Class A Shares is reallowed by Pioneer
Distributor to broker-dealers through whom the shares are sold. This reallowance
varies generally as a percentage of the offering price on sales under $1
million. Reallowances range from 1.0% to 5.0% depending on the Fund and the
amount of the sale. Broker-dealer reallowances on new funds and during certain
short-term promotions may be increased to 100% or more of the sales charge.
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Distribution Plans. Each of the Funds has a distribution plan(s)
pursuant to Rule 12b-1 under the 1940 Act which provides for certain payments to
be made to Pioneer Distributor. In the case of Funds which offer a single class
of shares or in the case of Multi-Class Funds with respect to Class A Shares,
the distribution plans (the "Class A Plans") provide for payments by such funds
of certain expenses up to 0.25% per annum of average daily net assets (0.15% for
money market funds). In the case of Multi-Class Funds with respect to Class B
and Class C Shares, the distribution plans (the "Class B Plans" and "Class C
Plans," respectively) provide for payments by such funds of fees relating to (a)
distribution services in an amount not to exceed 0.75% per annum of the average
daily net assets of the Class B or Class C Shares, as the case may be, of the
Multi-Class Fund, and (b) personal and account maintenance services in an amount
not to exceed 0.25% of the average daily net assets of the Class B or Class C
Shares, as the case may be, of the Multi-Class Fund. In 1995, the Boards of the
Funds (other than the Funds which were established in 1995) renewed the Class A
and Class B Plans. The Class C Plans were approved in November 1995. The
distribution plans are subject to annual renewals which require the approval of
the Funds' Board of Trustees, including a majority of Trustees who are not
"interested persons" of the Funds.
Domestic Sales of Shares of the Funds. Pioneer Distributor is a
registered broker-dealer (see "Regulation" below), employing 101 full-time
personnel, including 21 regional sales representatives who are responsible for
territories comprising most of the United States and Puerto Rico and who work
with broker-dealers to promote sales of the Funds' shares in their respective
territories. Substantially all of the Funds' shares are sold to the public by
securities sales persons registered with the National Association of Securities
Dealers, Inc. (the "NASD") who act as representatives of broker-dealer firms,
which are members of the NASD and which have signed sales agreements with
Pioneer Distributor. Shares of the Funds may be sold in all states, by
broker-dealers and registered representatives licensed in those states.
International Sales of Shares of the Funds. Pioneer Distributor's
wholly-owned subsidiary, Pioneer Fonds Marketing GmbH ("Pioneer Fonds
Marketing"), a company registered under the laws of the Republic of Germany,
performs marketing and sales activities with respect to sales of shares of
certain of the Funds in Europe, primarily Germany, Austria and Switzerland.
Pioneer Fonds Marketing currently has 14 employees. In 1995, approximately 13%
of the total sales of the United States registered Funds' shares were sold
outside of the United States.
Additional Information. For more information on sales of mutual fund
shares for the five years ended December 31, 1995, see "Sales of Mutual Fund
Shares" in the 1995 Annual Report, which information is incorporated herein by
reference.
VENTURE CAPITAL
Domestic Venture Capital Operations. In 1981, the Company organized a
wholly-owned subsidiary, Pioneer Capital Corporation ("Pioneer Capital"), for
the purpose of making venture capital investments and managing venture capital
funds. In 1986, Pioneer Capital organized a wholly-owned subsidiary, Pioneer
SBIC Corp.
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("PSBIC"), which is the general partner of Pioneer Ventures Limited Partnership
("PVLP"). PVLP is a Small Business Investment Company ("SBIC") licensed by the
U.S. Small Business Administration (the "SBA"). PSBIC is the general partner of
PVLP and has an 89.5% interest in PVLP. The limited partnership interests in
PVLP represent a 10.5% interest in PVLP and are owned by the four officers of
Pioneer Capital (the "Pioneer Capital Principals") who are responsible for the
operations and overall success of PVLP.
In 1995, Pioneer Capital formed Pioneer Ventures Limited Partnership II
("PVLP II"), a new SBIC. Pioneer Ventures Management L.P. ("PVM") serves as the
general partner of PVLP II. PVM's general partner is Pioneer Management SBIC
Corp., a corporation the shareholders of which are the Pioneer Capital
Principals. PVM's limited partners are the Company and the Pioneer Capital
Principals. The Company holds an 11.7% limited partnership interest in PVLP II
and a 45% limited partnership interest in PVM, which owns 2.3% of PVLP II. At
March 1, 1996, PVLP II had received funding commitments of $30.9 million from
investors.
At December 31, 1995, Pioneer Capital and PVLP held approximately $14.0
million of investments (at cost) in 20 privately-held companies and $2.5 million
(at cost) in seven publicly-held companies. The value of these investments as of
December 31, 1995 was $22.2 million. During 1995, Pioneer Capital and PVLP had
net realized and unrealized gains of $5.1 million from their venture capital
investment portfolio, at December 31, 1995, Pioneer Capital and PVLP had a total
of $5.4 million in cash available for additional investments. Additional capital
for investments is available to PVLP through the sale of SBA guaranteed
debentures. Through December 31, 1995, PVLP had availed itself of a total of
$4.95 million of SBA guaranteed debentures that mature at various times between
1998 and 2003 and bear interest rates between 6.12% and 9.8%.
At December 31, 1995, PVLP II held approximately $6.3 million of
investments (at cost) in eight privately-held companies. At December 31, 1995,
PVLP II had a total of $2.1 million in cash available for additional
investments.
Pioneer Capital and its affiliates utilize a diversified approach to
venture capital investing. Investments are in early-stage businesses seeking
initial financing as well as more mature businesses in need of capital for
expansion, acquisitions, management buyouts or recapitalizations. In general,
Pioneer Capital, PVLP and PVLP II invest in New England-based companies in a
variety of industries. At December 31, 1995, Pioneer Capital had eight
employees.
Venture capital investment portfolio valuations are reviewed quarterly
by the Company's Board of Directors and the values of such investments are
adjusted when circumstances require. As a general rule, an investment is
adjusted up or down, as the case may be, to conform to the price paid by a
sophisticated new third-party investor in any subsequent round of financing. An
investment may also be written down if the venture company is substantially
behind its business plan and may be written up if there
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is some other compelling reason for doing so. For PVLP and PVLP II, securities
which are publicly traded are valued on a valuation date at the average of the
last sales or closing price on the valuation date and the preceding two days in
the principal market in which such securities are traded, with an appropriate
discount if such securities are restricted or thinly traded. For PCC,
securities which are publicly traded are valued on the valuation date at the
closing price on the principal market on which such securities are traded, with
an appropriate discount if such securities are restricted or thinly traded.
Polish Venture Capital Operations. In 1995, the Pioneer Poland Fund
("PPF") received commitments for investments of approximately $60 million from
investors in Europe and the United States for venture capital investments in
Poland. In December 1995, PPF closed its first investment of approximately $1.4
million. The Company's indirect wholly owned subsidiary, Pioneer Investment
Poland Sp.z.o.o, manages PPF.
SHAREHOLDER SERVICES
Pioneering Services Corporation. At December 31, 1995, the Funds had
approximately 982,000 active shareholder accounts, including approximately
345,000 IRAs and other tax-qualified retirement accounts. Mutual fund
shareholder accounts and, in particular, qualified accounts, require an
exceptional amount of shareholder communications and transfer agency services.
In order to compete successfully with other mutual fund complexes, the Company's
wholly-owned subsidiary, Pioneering Services Corporation ("Pioneering
Services"), assumed transfer agent and shareholder services responsibilities for
the Funds in 1985.
As shareholder servicing agent for the Funds, Pioneering Services has
entered into agreements with each Fund pursuant to which it received in 1995
an annual active account fee of $22.00 for equity fund accounts, $30.00 for
fixed-income fund accounts and $28.00 for money-market fund accounts. Such
agreements are subject to annual renewals which require the approval of the
Funds' Boards, including a majority of members who are not "interested persons,"
and may be canceled by either party on 60 days' notice. For 1993, 1994 and 1995,
Pioneering Services received revenues from service fees from the Funds and
Pioneer Interest Shares of approximately $17 million, $20 million and $22
million, respectively.
Trustee/Custodian. The Company acts as the trustee/custodian for
accounts which are IRAs or other qualified retirement accounts and receives an
annual fee of $10 for each such account, payable by shareholders with such
accounts, up to maximum annual fees of $20 for shareholders with multiple
accounts of one plan type. Shareholders also have the option of paying a
one-time fee of $100 in lieu of the annual account fee.
Financial Services Limited. In January 1992, the Company's subsidiary,
Pioneer International, established Financial Services Limited ("FSL"), which is
50% owned by Pioneer International and 50% owned by Bank Polska Kasa Opieki,
S.A. in Poland. FSL was established as the unitholder servicing agent for the
First Polish Fund. Under the terms of the agreement between FSL and the Fund,
FSL will receive annual fees equal to the Polish zloty ("PZL") equivalent of
$12.00 per account. In 1995, such fees aggregated PZL 5.7 million
(approximately $2.4 million). At December 31, 1995, FSL serviced approximately
146,000 unitholder accounts and employed 81 full-time persons.
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COMPETITION
Management and Distribution Services. The mutual fund industry is
intensely competitive. Many organizations in this industry are attempting to
sell and service the same clients and customers, not only with mutual fund
investments but with other financial products. Some of the Company's competitors
have more products and product lines and substantially greater assets under
management and financial resources. The Company believes it is competitive in
terms of price and performance with other firms providing similar advisory
services to investment companies and to pension plans and endowment funds and
with firms engaged in distributing investment company shares.
The distribution of mutual fund shares has been significantly affected
by (i) the growth of no-load funds, the shares of which are sold primarily
through direct sales approaches without any sales charge, (ii) the evolution of
service fees payable to broker-dealers that provide continuous services to their
clients in connection with their investments in a mutual fund and (iii) the
development and implementation of complex distribution systems employing
multiple classes of shares and master-feeder fund structures. Typically, the
underwriter or distributor that pays a service fee is reimbursed by the mutual
fund under a plan of distribution pursuant to Rule 12b-1 under the 1940 Act
("Rule 12b-1 Plan"). All of the Funds distributed by Pioneer Distributor now pay
such service fees to broker-dealers. See "Distribution of Fund Shares -
Distribution Plans" above.
For certain of the Funds (the "Multi-Class Funds"), the Company also
offers a multi-class share structure. Under such structure, the Multi-Class
Funds offer both the traditional front-end load shares, or Class A Shares, and
two classes of back-end load shares, Class B and Class C Shares. On back-end
load shares, Pioneer Distributor pays a commission on the sale (typically equal
to 4% of the offering price for Class B Shares and 1% of the offering price on
Class C Shares) but the investor does not pay any sales charge unless it redeems
before the expiration of the minimum holding period, which ranges from three to
six years in the case of Class B Shares and which is one year in the case of
Class C Shares. Pioneer Distributor's cash flow may be adversely affected by
vigorous sales of back-end load shares because its recovery of the cost of
commissions paid up front to dealers is spread over a period of years. During
this period, the Company bears the costs of financing and the risk of market
decline. Pioneer Distributor is reimbursed for such commissions from payments by
the Funds under Rule 12b-1 Plans (that are subject to annual renewals by the
disinterested trustees of the Funds) and from back-end sales charges paid by
redeeming investors before the expiration of the holding periods.
Success in the investment advisory and mutual fund share distribution
businesses is substantially dependent on the Funds' investment performance. Good
performance stimulates sales of the Funds' shares and tends to keep redemptions
low. Sales of Funds' shares generate higher management fees and distribution
revenues (which are based on assets of the Funds). Good performance also
attracts private institutional accounts to Pioneering Management. Conversely,
relatively poor performance results in decreased
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sales and increased redemptions of the Funds' shares and the loss of private
accounts, with corresponding decreases in revenues to the Company. In 1995, the
performance of the Funds managed by Pioneering Management was generally
competitive with comparable mutual funds offered by others and with relevant
indices and benchmarks approved by the Funds' Boards.
Venture Capital. The venture capital industry both in the United States
and abroad is extremely competitive. In the process of investing and attempting
to raise funds from entities other than the Company, Pioneer Capital and the
Company's foreign subsidiaries engaged in the venture capital industry must
compete with a large number of venture capital firms, many of which have
substantially larger staffs and more capital to invest.
Shareholder Services. The shareholder services industry is extremely
competitive. Pioneering Services believes that it is providing high quality
shareholder services for the Funds and their shareholders at rates that are
competitive in the industry. The Company believes that effective shareholder
services are vital to success in this industry. While these services have
historically been provided by banks and other institutions with greater
resources than Pioneering Services, the Company believes that Pioneering
Services generally outperforms such competitors because it is dedicated
exclusively to the provision of such services to the Funds and their
shareholders, rather than to a number of different customers.
REGULATION
Each of the Funds and Pioneer Interest Shares is registered under the
1940 Act and the Securities Act of 1933, as amended. As registered investment
companies, the Funds and Interest Shares are subject to extensive regulation
governing all aspects of their operations. In addition to being subject to the
regulatory authority of the Securities and Exchange Commission (the "SEC"), the
Funds and Pioneer Interest Shares are also subject to regulation by the
securities regulators in all fifty states and in the foreign jurisdictions in
which certain Funds are registered.
Pioneer Distributor, as a registered broker-dealer under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), is required, among other
things, to maintain certain records, file reports with the SEC, supervise
employees and deal fairly with customers, all in accordance with the 1934 Act
and the rules and regulations promulgated thereunder. Pioneer Distributor is
also a member of the NASD, a securities industry self-regulatory body which is
itself regulated by the SEC under the 1934 Act. As a member of the NASD, the
Company is required to abide by the standards, including pricing practices, set
forth in the Articles of Incorporation, the By-Laws and the Rules of Fair
Practice of the NASD.
Pioneering Management, as investment manager of the Funds and Pioneer
Interest Shares and adviser to the Institutional Accounts, is registered
pursuant to the Investment Advisers Act of 1940, as amended, and as such is
subject to certain recordkeeping, compensation and supervisory rules and
regulations.
11
<PAGE> 12
Pioneering Services, as transfer agent for the Funds, is registered
pursuant to the 1934 Act and as such is subject to recordkeeping requirements
and certain other rules and regulations.
The SEC has jurisdiction over registered investment companies,
registered investment advisers, broker-dealers and transfer agents and, in the
event of a violation of applicable rules or regulations, may take action which
could have a serious effect on Pioneering Management's, Pioneer Distributors' or
Pioneering Services' businesses. The violation of any of the applicable laws,
rules or regulations to which Pioneer Distributor is subject could have an
adverse effect upon the Company.
Pioneer First Polish was established under, and is regulated by, the
Public Trading in Securities and Trust Funds Act of March 22, 1991.
Pioneer Global Bond Fund Plc and Pioneer Global Equity Fund Plc are
each authorized by The Central Bank of Ireland under the European Communities
(Undertakings for Collective Investment in Transferable Securities) Regulations,
1989 (S.I. No. 78 of 1989) of Ireland. Pioneer DM Cashfonds Plc is authorized by
The Central Bank of Ireland as an investment company with "designated" status
pursuant to Part XIII of the Companies Act, 1990.
CONTRACTUAL RELATIONSHIPS
The businesses of the Company, Pioneering Management, Pioneer
Distributor, Pioneering Services, Pioneer First Polish, FSL and Pioneer Ireland
are dependent upon their associations and contractual relationships with the
funds with which they have contractual relationships. In the event any of the
management contracts, underwriting contracts or service agreements were canceled
or not renewed pursuant to the terms thereof, the Company may be substantially
adversely affected. The Company, Pioneering Management, Pioneer Distributor,
Pioneering Services, Pioneer First Polish, FSL and Pioneer Ireland consider
their respective relationships with such funds to be good and they have no
reason to believe that their respective management, underwriting and service
contracts will not be negotiated on a reasonable basis in the future; however,
there is no assurance that such funds will continue these relationships.
RELATIONSHIP WITH THE INSTITUTIONAL ACCOUNTS
Pioneering Management's agreements with the seven Institutional
Accounts are all terminable on short notice. The trustees or corporate officials
who control such accounts are usually free to change investment advisers without
cumbersome legal procedures. In the past, private accounts have terminated their
agreements with Pioneering Management for various reasons such as performance,
business combinations which result in the merging of accounts advised by
Pioneering Management into accounts managed by other investment advisers, or
changes in the structure or funding of pension plans.
12
<PAGE> 13
NEW BUSINESS DEVELOPMENT
Russian Investment Operations. In April 1995, the Company acquired
approximately 51% of the shares of First Voucher Fund (the "Voucher Fund"), the
largest voucher investment fund established in Russia in connection with that
country's privatization program. The shares were issued by the Voucher Fund to
two newly-formed subsidiaries of Pioneer Omega, Inc. ("Pioneer Omega"), a
Delaware corporation in which the Company owns 100% of the outstanding common
stock. In addition to its ownership interest in the Voucher Fund, Pioneer
Omega, acting through its subsidiary, Pioneer First Russia, Inc. ("Pioneer
First Russia"), also holds a 100% interest in Management Company, Kompaniya
po Upravleniu Investitsionnymi Fondomi (KUIF) ("KUIF"), Pioneer Securities and
Pioneer Services and a majority interest in First Voucher Bank.
KUIF currently serves as investment manager to the Voucher Fund and
will serve as investment manager to the new unit investment funds described
below. Pioneer Securities provides brokerage, corporate financing and financial
advisory services to Russian and western corporations, including the Voucher
Fund. In early 1996, Pioneer First Russia established Pioneer Services to serve
as registrar and transfer agent for the Voucher Fund and the new unit investment
funds. First Voucher Bank currently services corporate accounts and will be used
in the future to enhance the distribution network of Pioneer First Russia's
various financial services.
KUIF has been selected by the Russian government's Commission on
Securities and Capital Markets as one of three investment management companies
to participate in the pilot unit investment fund project. As a result, Pioneer
First Russia is developing new funds for Russian retail investors under the new
unit investment fund regulations. These funds will be managed by KUIF and will
be similar to the open-end mutual funds offered by the Company in Poland and
the Czech Republic. Pioneer First Russia is also in the process of developing
two new Russian investment funds to be sold to western institutional investors.
Each fund will be advised by Pioneer First Russia and will seek capital
appreciation through investment in Russian companies (listed companies in the
case of one fund and private companies in the case of the other fund). KUIF
will serve as investment manager to one of the funds while Pioneer Investments,
a majority owned subsidiary of the Company, will serve as investment manager to
the other fund.
Pioneer Omega paid $2.0 million in cash and issued preferred shares
(the "Omega shares") valued at $6 million as consideration for the acquisition
of KUIF and related rights. The holder of the Omega shares has the right to
cause the Company to purchase such shares (the "put option"), and the Company
has a corresponding right to purchase such shares from the holder (the "call
option"). The put and call options are each exercisable with respect to
one-third of the Omega shares on the
13
<PAGE> 14
first, second and third anniversaries of the closing of the transaction. The
put and call option exercise price is $2 million per tranche, plus a 5% per
annum premium on the option exercise price. The Company will pay a total of
$6.6 million for the Omega shares over a three-year period as the put and/or
call options are exercised.
Taiwan and India. Pioneering Management is a minority participant (10%
ownership) in a joint venture in Taiwan, which was organized to manage and
distribute investments in Taiwanese investment companies. Pioneering Management
is a participant (45%) in a joint venture in India, which was organized to
provide financial services in the Indian market, including mutual fund
management. See "Management Activities - Other Management Activities - India
Fund."
Czech Republic. In 1995, subsidiaries of the Company organized Pioneer
Czech Investment Company, A.S. ("Pioneer Czech"). Pioneer Czech provides
investment advice and other financial services, including shareholder services,
to a new mutual fund that commenced operations in November 1995.
Real Estate Advisory Services. In January 1996, the Company established
Pioneer Real Estate Advisors, Inc. ("Pioneer Real Estate") to provide real
estate advisory services to institutional investors and corporations in the
United States, Poland, Russia and India. Pioneer Real Estate also provides
advice regarding real estate investments to the Company's own subsidiaries.
Pioneer Real Estate, though a wholly owned subsidiary, is also developing a
Polish real property fund to be sold to Polish and western institutional
investors.
NATURAL RESOURCE DEVELOPMENT
PIONEER GOLDFIELDS LIMITED
The Company's indirect wholly owned subsidiary, Pioneer Goldfields, a
corporation organized under the laws of Guernsey, Channel Islands, conducts
mining and exploration activities in the Republic of Ghana and exploration
activities elsewhere in Africa. Pioneer Goldfields' principal asset is its
ownership of 90% of the outstanding shares of Teberebie Goldfields Limited
("TGL"), a corporation organized under the laws of the Republic of Ghana. TGL is
engaged in the exploration, mining, and processing of gold ore on a mining
concession located in the Western Region of the Republic of Ghana. The
remaining 10% ownership interest in TGL is held by the Republic of Ghana.
Organization and Mining Lease. In 1986, the Company and a joint
venturer organized TGL for the purpose of evaluating the feasibility of mining
gold on several tracts of land in the Teberebie concession area ("Teberebie") in
the Republic of Ghana. In February 1988, TGL entered into a mining lease with
the Republic of Ghana (the "Government") pursuant to which TGL received
exclusive gold mining rights for a term of 30 years. Under this lease, the
Government receives annual royalties of between 3.0% and 12.0% of TGL revenue,
which rate will vary based on TGL's operating profit margin and its level of
capital expenditures, and is assured a continuing 10% equity interest in TGL. In
April 1989, the Company purchased the other non-governmental joint venturer's
14
<PAGE> 15
interest for $3.7 million, primarily in cash. In 1992, TGL was granted a second
26-year mining lease over two contiguous areas to the north and west of the
original lease area, the terms of which are substantially similar to the
original lease. In 1995, the Company paid royalties to the Government in the
amount of 3.0% of TGL revenue.
Teberebie Mine Site. The Teberebie mine site consists of mining
concessions covering an area of approximately 42 square kilometers. It is
located in the Western Region of the Republic of Ghana and is approximately six
kilometers south of the town of Tarkwa. The Teberebie mine is geographically
approximately 200 kilometers west of, and 330 kilometers by road from, Accra,
the capital of the Republic of Ghana. It is approximately 95 kilometers by road
from Takoradi, which is one of Ghana's two major ports and the point of entry
for most of the imported equipment used at the Teberebie mine.
Geology. The basement rocks of Ghana are precambrian in age and form
part of a regional structure known as the West African Shield. The rocks that
constitute the West African Shield are both Sedimentary and igneous in origin.
The rocks have been subjected to pressure and temperature alteration and
deformation. Some of the altered rocks (metamorphic rocks) have a greenish
coloration, and areas exhibiting these features are known as greenstone belts.
There are a number of greenstone belts around the world. They attract the
attention of commercial geologists because various minerals, particularly gold,
are associated with them. In Ghana, the major gold producers operate along
various prominent gold-bearing belts which extend for a distance of some 300
kilometers in a trend from northeast to southwest. These gold-bearing belts
consist of both greenstone and sedimentary formations. TGL mines the sedimentary
formations.
Locally, the thick sedimentary sequence is called the Tarkwaian system
and gold is found in the upper, coarser horizons. At Teberebie, gold occurs in a
sedimentary sequence known as the Banket formation. This formation consists of a
series of sedimentary strata with siltstones, mudstones and sandstones
interspersed with some coarser pebble horizons. Where the well-rounded pebbles
are particularly large, the horizon is known as a conglomerate. Gold is found in
the matrix which binds these pebbles together. The Banket formation has broad
similarities to the Witwatersrand reef conglomerate in South Africa. As such it
is younger than the Birimian greenstone rocks that underlie it. The region has
been subject to folding, faulting and shearing. Structurally, the Banket
Formation consists of a gently folded syncline, trending from northeast to
southwest. The western limb of the syncline extends over 6.5 kilometers on the
property, with the eastern limb reaching the surface just beyond the eastern
boundary of the mining concession. The western and eastern limbs outcrop on the
surface about four kilometers apart. At the center of the syncline at Teberebie,
the mineralized horizons are some 400 meters below surface. In the south, the
western limb dips to the east at about 35 degrees. This dip flattens toward the
north where it is approximately only ten degrees.
15
<PAGE> 16
The deposit at the Teberebie mine is a paleoplacer where gold occurs in
free-milling state with other heavy minerals in a matrix of a quartz pebble
conglomerate. The gold particles are fine-grained, ranging from two to 280
microns, averaging approximately 100 microns in diameter. The origin of the gold
has not been identified, although it may have been derived from the underlying
Birimian basement rocks.
Gold Reserves. The earliest known exploration on the Teberebie property
was conducted in the early 1890's when several adits were driven into the ridge.
Records indicate that approximately 15,000 tonnes of ore was extracted from
adits and drifts prior to World War II. Four of these adits were cleared and
systematically sampled. At the end of 1992, TGL had drilled a total of 18,545
meters in 296 holes on the property. Holes were drilled on 74 cross-sections
perpendicular to the gold bearing ridge along a strike length of 6,050 meters,
with three to five drill holes per section. Sections were 50 to 100 meters
apart, and drill hole spacing on each section was 50 to 100 meters. In 1993, TGL
drilled 16 in-fill ore holes advancing 930 meters on one ridge designed to
move reserves from the possible to proven and probable categories. In 1994, TGL
drilled 5,090 meters in 39 holes on the property. This drilling added 1.9
million ounces to the audited reserves. Contiguous with this, 2,551.5 meters of
exploratory drilling in 11 holes was completed. In 1995, TGL drilled 3,420
meters in 18 holes on the property. This drilling added 2.4 million ounces to
the audited reserves. In addition, TGL drilled a total of 2,568 meters in seven
exploration drill holes and 765 meters in 12 site investigations and
geotechnical holes.
In August 1995, TGL received an independent certification of additional
gold reserves at its mining concession in Ghana. Proven and probable reserves
were established based on mapping, sampling, drilling, assaying and evaluation
techniques typical of those that are generally employed in the mining industry.
As of December 31, 1995, mineable in situ proven and probable reserves
increased to approximately 9.1 million ounces, including previously proven and
probable reserves of 6.7 million ounces. Proven and probable reserves comprise
8.1 million ounces of ore which will be processed through crushing and heap
leaching operations and 1.0 million ounces which will be leached directly
utilizing run-of-mine dump leaching techniques. The cost to date of proving up
reserves at Teberebie has been approximately $0.36 per ounce. Mineable reserves
at December 31, 1995, are summarized on the following table:
<TABLE>
<CAPTION>
MINEABLE RESERVES
--------------------------------------------------------------------
CRUSHED ORE RUN-OF-MINE ORE
----------- ---------------
Grams Grams
per per
Tonnes Tonnes Ounces Tonnes Tonnes Ounces
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Total Proven 149,236,000 1.46 7,039,000 49,859,000 0.54 865,000
Total Probable 22,740,000 1.41 1,030,000 8,625,000 0.56 154,000
Total Reserves 171,976,000 1.46 8,069,000 58,484,000 0.54 1,019,000
TOTAL MINEABLE RESERVE OUNCES: 9,088,000
=========
</TABLE>
16
<PAGE> 17
The cut-off grades used to delineate the reserves were 0.765
grams per tonne for crushed ore and 0.25 grams per tonne for run-of-mine ore at
a gold price of $385 per ounce. Based on the current technology at the mine, it
is estimated that recoverable gold from these open-pit reserves will aggregate
approximately 6.7 million ounces.
TGL has increased its gold reserves each year since it began
operations. On the basis of projected production rates and the existing proven
and probable reserves, it is estimated that the Teberebie mine has a remaining
life of approximately 18 years.
Mining and Processing. The Teberebie mine is a conventional open pit,
heap leach operation. Mining at Teberebie is a technically simple drill and
blast, load and haul operation, carried out on three contiguous ridges along a
strike length of some 6.5 kilometers. The ridges, running from north to south,
are named Teberebie, Awunaben and Mantraim. The mine is currently a ridge-top
surface mine operating from what will be two pits, the Teberebie/Awunaben pit
and the Mantraim pit. Mining operations are carried on 24 hours per day in three
eight-hour shifts, 358 days per year.
TGL processes its ore using a conventional heap leach operation.
Higher-grade ore is crushed in one of TGL's two ore-crushing plants, each of
which has a capacity of approximately 3.5 million tonnes of ore per year. Cement
is added to the crushed ore to bind the ore and to raise its alkalinity to a
level conducive to cyanide leaching. Run-of-mine ore is not crushed or
agglomerated with cement, but instead proceeds directly to later stages of
processing. The agglomerate of ore and cement is then placed on a heap leach pad
and the run-of-mine ore is placed on a dump leach pad. Both are then treated
with a dilute cyanide solution which percolates through the material dissolving
the gold. The dilute cyanide solution containing the dissolved gold drains into
collection ponds. From there, the solution is pumped to an adjacent adsorption
desorption refinery plant (the "ADR Plant") where it passes through a series of
activated carbon adsorption columns. The gold contained in the solution is
adsorbed onto the carbon and the solution is then recirculated to the barren
solution pond where it is refortified with sodium cyanide. Gold is then
chemically stripped from the carbon adsorption columns and recovered from the
stripper solution by electrowinning onto stainless steel cathodes. The cathodes
are removed approximately every two weeks at each ADR Plant, at which time the
gold sludge is washed off and dried. The sludge is then mixed with flux and
smelted to produce dore.
Gold Production. TGL began shipping gold in October 1990. In the second
quarter of 1991, the mine reached then commercially feasible production levels
(about 1,000 ounces per week) and full production levels (about 2,000 ounces per
week) during the fourth quarter of 1991. Management initiatives permitting the
efficient utilization of production equipment and facilities enabled TGL to
increase production to over 3,000 ounces per week in 1993. After TGL's expansion
in 1994, which is further described below, production increased to approximately
4,500 ounces per week. TGL expects to produce approximately 255,000 ounces
(almost 4,900 ounces per week) in 1996.
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<PAGE> 18
TGL shipped approximately 236,000 ounces of gold in 1995, contributing
$90.2 million to the Company's revenues. In 1994 and 1993, TGL shipped
approximately 176,000 and 165,000 ounces of gold, respectively. A three-year
financial summary for the gold mining business segment is shown below:
<TABLE>
<CAPTION>
1995 1994 1993
(IN MILLIONS) (IN MILLIONS) (IN MILLIONS)
------------- ------------- -------------
<S> <C> <C> <C>
Revenues.................. $90.2 $67.6 $59.2
Net Income................ $14.0 $18.3 $10.4
Total Assets.............. $81.5 $75.7 $61.9
</TABLE>
The average realized price of gold sold by TGL during 1995, 1994 and
1993 was $383, $383 and $359 per ounce, respectively, based on the market spot
price of gold at the time of sale. Spot prices of gold fluctuate widely and are
affected by a number of factors including supply and demand, inflation
expectations, the strength of the U.S. dollar and interest rates.
At present, TGL does not enter into forward gold sales or otherwise
engage in gold price hedging. In the past, TGL had established a gold
price-floor program, utilizing put options to secure a minimum selling price of
$310 per ounce. These options expired on March 31, 1996 and TGL currently does
not intend to renew these options unless the price of gold declines to below
$375 per ounce. The Company may consider additional hedging strategies if and
when it deems circumstances appropriate.
TGL's cash cost per ounce and total cost per ounce for 1995, 1994 and
1993 are summarized on the following table:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash Cost Per Ounce.................... $198 $161 $131
Total Cost Per Ounce................... $277 $248 $229
</TABLE>
The total cost per ounce includes $6 in each of 1995, 1994 and 1993 for
amounts expended by the Company, principally for political risk insurance
premiums.
Development and Expansion. TGL has undertaken two major capital
expenditure programs at the Teberebie mine to date, designated Phase I and Phase
II. Phase I included the development of the mine site and the construction of
the crushing and processing facility known as the East plant. Phase II, which
was completed in 1994, included the construction of a crushing and processing
facility that replicated the East plant and is known as the West plant. TGL is
currently implementing a third capital expenditure program, designated Phase
III, to take advantage of the additional potential of the Teberebie mine. Phase
III will include a third heap leach operation and the construction of a near-pit
gyratory crushing facility which will act as the primary crushing facility for
the West plant and the new South plant. Phase III will also gradually
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<PAGE> 19
introduce a new and larger mining fleet, with the objective of mining at an
annualized rate of approximately 60 million tonnes of material per year
(including approximately 12 million tonnes of ore) and raising overall gold
production to at least 400,000 ounces per year when Phase III becomes fully
operational (expected in 1998). Realization of this objective is subject to the
uncertainties inherent in any mining and processing operation. The initial work
on Phase III has commenced. The major crushing equipment has been ordered and
the initial mining equipment, consisting of four Caterpillar ("CAT") 785 trucks
and a CAT 5230 hydraulic shovel, has been delivered to the site and is being
assembled. In addition, in March 1996, TGL received from the Ghana
Environmental Protection Agency the necessary environmental permit to proceed
with the Phase III expansion. For a description of the financing facilities
relating to the Phase III expansion, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Natural Resource Development
Businesses - Gold Mining Business - Liquidity and Capital Resources" included
in the 1995 Annual Report and which is incorporated herein by reference.
Customers and Employees. During 1995, 100% of gold sales represented
gold shipments from TGL in Ghana to two unaffiliated European refiners for
refining and subsequent sale. Because of the worldwide demand for gold, the
Company does not believe that the loss of such customers would have a material
adverse effect on the Company or its subsidiaries.
At March 1, 1996, TGL had 1,129 employees, of which 1,102 are
Ghanaians. The terms of employment and compensation for junior TGL staff, known
as monthly rated employees, are determined pursuant to a collective bargaining
agreement between TGL and the Ghana Mineworkers Union. The terms of the
collective agreement (other than pay levels) are negotiated every three years.
Pay levels are negotiated annually. The current collective bargaining agreement
expires in July 1998. TGL experienced a two-day work stoppage in 1994 in
connection with union negotiations. The work stoppage had no material effect on
TGL's operations and TGL continues to believe that its relations with its
employees are excellent.
There is, however, a shortage of available labor with the requisite
skills and experience necessary to operate large scale mining equipment. TGL has
experienced and continues to experience some difficulty in recruiting employees
with the necessary skills. With the continued development of mines in Ghana, and
in the vicinity of the Teberebie mine, in particular, the shortage will likely
continue and perhaps become more acute.
Regulation and Taxation. Mining activities in the Republic of Ghana are
governed by PNDCL 153, the Minerals and Mining Law of 1986 (the "MML").
The Republic of Ghana does not currently have a developed system of
environmental regulation that applies to TGL's operations. However, it has
always been a strategic objective of the Company to minimize the effects of its
subsidiaries' mining operations on the environment. TGL is currently preparing
an overall environmental action plan, a decommissioning plan and a reagent spill
management plan and has initiated site rehabilitation and revegetation studies.
19
<PAGE> 20
In 1994, the Ghana Environmental Protection Agency was established to
regulate environmental matters to ensure implementation of government policies
concerning the environment. In May 1994, the Minister of the Environment,
through the Minerals Commission, produced legislative proposals relating to the
environmental regulation of mines and the Ghanaian Environmental Protection
Agency produced draft guidelines in relation to air and water quality. The
management of TGL regarded these guidelines as satisfactory and workable. These
guidelines were followed by the publication for consultation of draft
regulations that provoked considerable controversy among the mining community
in Ghana and were subsequently withdrawn. To date, no new or replacement draft
regulations have been published although the Government of Ghana has stated its
intention to re-issue draft regulations within the next 12 months. If
implemented in the form in which they were originally issued, certain
provisions of the draft regulations would have significant adverse operational
and financial consequences for TGL. A number of strong representations have
been made by the Ghanaian mining industry to the government relating to the
draft regulations and TGL does not believe that the draft regulations will be
implemented in the form in which they were originally issued.
In the first quarter of 1994, the Republic of Ghana enacted the
Minerals and Mining (Amendment) Act of 1994 which reduced the income tax rate
for mining companies from 45% to 35%. As a result, the Company's first quarter
1994 earnings were enhanced by 90% of a $4.4 million reduction (which amounted
to $0.16 per share) in income taxes deferred since commencement of commercial
operations in April 1991. TGL's effective tax rate (U.S. and Ghana combined) in
1995, 1994 and 1993 was 38%, 36% and 48%, respectively.
Pursuant to the terms of the MML, income taxes may be deferred until
recovery of capital investment. Accordingly, deferred taxes at December 31,
1995, 1994 and 1993, were $10.1 million, $15.9 million and $19.8 million,
respectively. The reduction in deferred taxes during 1994 includes the $4.4
million reduction attributable to the foregoing decrease in the income tax rate
for mining companies. Income tax payments to the Republic of Ghana during 1995
and 1994 were $14.1 million and $6.2 million respectively. Of such taxes paid
in 1995, $5.5 million was attributable to the tax year ended December 31, 1994.
Income taxes were deferred during all of 1993.
Insurance. The Company maintains $64.8 million of "political risk"
insurance principally from the Overseas Private Investment Corporation ("OPIC")
covering 90% of its equity and loan guarantees. This insurance also covers 90%
of the Company's proportionate share of TGL's cumulative retained earnings. In
addition, the Company maintains standby coverage of $2.1 million, which can be
activated semiannually, to cover increases in the Company's proportionate share
of TGL's cumulative retained earnings. In addition to other commercial
insurance coverage, TGL has secured business interruption coverage of up to
$19.0 million for losses associated with machinery breakdown and property
damage and to defray continuing infrastructure and interest costs.
20
<PAGE> 21
Exploration Activities of Pioneer Goldfields. Since the end of 1993, in
addition to continuing to develop the Teberebie mine, Pioneer Goldfields has
increased its exploration activities in the Republic of Ghana and in other
African countries. These activities are currently conducted by TGL in Ghana and
by Pioneer Goldfields or its local subsidiary in Niger, Burkina Faso and
Zimbabwe. In 1995, Pioneer Goldfields incurred exploration costs of
approximately $1.2 million, approximately $770,000 of which related to TGL's
exploration activities at the Teberebie mine site and elsewhere in Ghana.
TIMBER VENTURES
The Company holds a majority interest in three companies located in the
Russian Far East (Forest Starma, Amgun-Forest and Udinskoye) which were
established to develop timber production for markets in the Pacific Rim,
principally Japan. The Company is in the process of consolidating its ownership
of these three companies under its wholly owned subsidiary, Pioneer Forest, Inc.
Forest Starma, in which the Company has a 71% direct interest and a 3%
indirect interest, is pursuing the development of timber production under two
long term leases comprising 88,800 hectares (approximately 219,500 acres) in
the aggregate with annual cutting rights of 210,000 cubic meters awarded to the
venture in the Khabarovsk Territory of Russia. In addition, Forest Starma is in
the process of securing additional cutting rights of approximately 90,000 cubic
meters per year. Forest Starma has developed a site, including a jetty, from
which it exports timber. Timber harvesting commenced in the first quarter of
1995 and the first shipments of timber (acquired in the development phase)
totalling approximately 30,000 cubic meters occurred in the third and fourth
quarters of 1995. The related revenues were used to offset development costs.
In November 1995, Amgun-Forest and Udinskoye each executed a long-term lease
(50 years) relating to timber harvesting. The Amgun-Forest lease covers 264,700
hectares (approximately 654,000 acres) with annual cutting rights of 350,000
cubic meters while the Udinskoye lease covers 156,600 hectares (approximately
387,000 acres) with annual cutting rights of 200,000 cubic meters. In the
aggregate, Forest Starma, Amgun-Forest and Udinskoye have long-term leases in
place comprising 510,000 hectares (approximately 1,260,500 acres) with annual
cutting rights of 760,000 cubic meters.
Capital required by Forest Starma is now projected at approximately
$36.4 million through the end of 1996, including $20.1 million in subordinated
debt provided by the Company and $9.3 million financed pursuant to a conditional
loan commitment already in place. This loan, which would initially be guaranteed
by the Company, would cease to be guaranteed when the project meets certain
production and cash flows tests. During 1996, the Company expects to provide
additional bridge financing as Forest Starma applies for up to $7.0 million in
third-party financing.
Investment by the Company in Forest Starma aggregated $29.4 million
(net of an assumed value added tax recovery on imports) at December 31, 1995,
$9.3 million of which is considered bridge financing subject to repayment upon
receipt of third-party loan proceeds. Forest Starma is expected to reach a
production level of approximately 220,000 cubic meters per year by the end of
1996.
21
<PAGE> 22
Work on the feasibility study for Amgun-Forest has commenced, and the
feasibility study for Udinskoye will be carried out at a later date. The
studies will form the basis for estimating capital requirements for these
projects. Preliminary estimates for these two new projects are that, prior to
securing third-party financing, the Company will provide funding of
approximately $1.3 million in 1996.
The Company has secured OPIC political risk insurance in amount of up
to $47 million which would protect 90% of the Company's equity investment and
loans and a proportionate share of cumulative retained earnings.
TAS-YURJAH MINING COMPANY
In 1994, the Company entered into a joint venture, Joint Stock Company
Tas-Yurjah Mining Company ("Tas-Yurjah"), with a Russian company to explore
potential gold mining properties in the Khabarovsk Territory of Russia. The
Company currently owns 50% of Tas-Yurjah. In 1995, Tas-Yurjah secured a license
to conduct exploration activities over a 240 square kilometer area (the
"licensed area"). Tas-Yurjah expects to significantly expand the licensed area
in the near future. During the second half of 1996, Tas-Yurjah plans to conduct
drilling and geochemical and geological surveys to further examine anomalies
located in the licensed area. At December 31, 1995, the Company had expended
approximately $1.3 million for exploration work related to Tas-Yurjah and
expects to expend a similar amount in 1996.
METALS VENTURES
Since 1991, a subsidiary of the Company, Pioneer Metals and Technology,
Inc., has been involved in a development-stage business in Russia through its
subsidiary, for the production and sale of powdered metals, permanent magnets
and various trading endeavors.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company and its subsidiaries conduct their principal operations
from leased premises with approximately 111,000 square feet at 60 State Street,
Boston, Massachusetts, under two leases. The first to expire of these leases
(which covers substantially all of the space) expires in 2002, with two
five-year renewal options. The rent expense for these premises was approximately
$2.9 million in 1995. The Company believes that its facilities are adequate for
its current needs and that additional space will be available as needed.
Teberebie Goldfields Limited, conducts mining operations in Tarkwa,
Ghana. The Republic of Ghana has granted TGL land concessions of approximately
42 square kilometers. The mining facilities included on the Teberebie mine site
include approximately 48 housing and office buildings, two four-stage crushing
plants, heap leaching facilities and ponds, two processing plants and
refineries, a clinic, a laboratory, a warehouse and an eight-bay maintenance
shop for heavy equipment. TGL believes that its facilities are generally in a
state of good repair and adequate for its current needs and that additional
facilities will be constructed as needed. See "Item 1 Business - Pioneer
Goldfields Limited" for a description of TGL's Phase III expansion and the
facilities being constructed in connection therewith.
In December 1992, Pioneer First Polish purchased a 38-year capital
lease, convertible to perpetual use, on a two-year-old, 373-square-meter office
building in Wilanow, Warsaw. Pioneer First Polish is currently subleasing the
property to an unaffiliated corporation for a three-year term that commenced on
March 1, 1995. Through March 1996, Pioneer First Polish had leased approximately
1,200 square meters of office space in downtown Warsaw for fund management and
distribution operations. FSL also leases approximately 1,400 square meters of
office space and 502 square meters of storage space in Warsaw. The terms of the
leases range from one to five years.
22
<PAGE> 23
The Company's 74%-owned subsidiary, Forest Starma, is pursuing the
development of timber production under two long term leases comprising 88,800
hectares (approximately 219,500 acres) in the aggregate with annual cutting
rights of 210,000 cubic meters awarded to the venture in the Khabarovsk
Territory of Russia. Amgun-Forest and Udinskoye, the Company's other
majority-owned Russian timber ventures, each have a long-term lease (50 years)
relating to timber harvesting. The Amgun-Forest lease covers 264,700 hectares
(approximately 654,000 acres) with annual cutting rights of 350,000 cubic meters
while the Udinskoye lease covers 156,600 hectares (approximately 387,000 acres)
with annual cutting rights of 200,000 cubic meters. In the aggregate, Forest
Starma, Amgun-Forest and Udinskoye have long-term leases in place comprising
510,000 hectares (approximately 1,260,500 acres) with annual cutting rights of
760,000 cubic meters.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
23
<PAGE> 24
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages of the executive officers of the
Company, and a description of the positions and offices each holds with the
Company and its significant subsidiaries.
<TABLE>
<CAPTION>
Positions with the Company and its
Name Age Significant Subsidiaries
---- --- ------------------------
<S> <C> <C>
John F. Cogan, Jr. 69 President, Chief Executive Officer and Chairman
of the Board of the Company since 1962. Chairman
of Pioneering Management since 1993 and
President of Pioneering Management from 1962 to
1993. Director of Pioneering Management since
1962. Chairman and director of Pioneer
Distributor. Chairman, President and trustee or
director of each of the registered investment
companies in the Pioneer Family of Mutual Funds.
President and director of Pioneer International,
Pioneer Omega and Pioneer First Russia. Director
of Pioneering Services, Pioneer Capital and
Pioneer Real Estate. Chairman and director of
Pioneer Goldfields, TGL, Joint Stock Company
Pioneer Metals International, Joint Stock
Company Forest Starma ("Forest Starma") Joint
Stock Company Pioneer Investments ("Pioneer
Investments"), Joint Stock Company Amgun-Forest
("Amgun-Forest"), and Joint Stock Company
Udinskoye. Member of Supervisory Board of
Pioneer First Polish and Pioneer Czech.
Chairman of the Supervisory Board of Pioneer
Fonds Marketing. Director of Pioneer Ireland
and each of the Irish Funds. Senior Partner of
the Boston law firm, Hale and Dorr, counsel to
the Company.
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C> <C>
Robert L. Butler 55 Executive Vice President of the Company since
1985. Director of the Company since 1988.
President and director of Pioneer Distributor
since 1989. Director of Pioneering Management,
Pioneering Services, Pioneer International and
Pioneer Real Estate. Member of Supervisory Board
of Pioneer First Polish and Pioneer Czech. Vice
Chairman of Pioneer Fonds Marketing and Pioneer
Czech. Director of Pioneer Ireland and each of
the Irish Funds. Previously, Vice President of
the NASD.
David D. Tripple 52 Executive Vice President of the Company since
1986. President of Pioneering Management since
1993 and Chief Investment Officer and director
of Pioneering Management since 1986. Executive
Vice President of Pioneering Management from
1986 to 1993. Executive Vice President and
trustee or director of each of the registered
investment companies in the Pioneer Family of
Mutual Funds. Director of Pioneer Distributor,
Pioneer Capital, Pioneer International, Pioneer
Investments, Pioneer Real Estate, Pioneer
Omega, Pioneer First Russia, Pioneer Ireland
and each of the Irish Funds. Member of
Supervisory Board of Pioneer First Polish and
Pioneer Czech.
William H. Keough 58 Senior Vice President and Chief Financial
Officer of the Company since 1986. Treasurer of
the Company, Pioneer Distributor, Pioneering
Management, Pioneering Services, Pioneer
Capital, Pioneer International, Pioneer Real
Estate, Pioneer Omega and Pioneer First Russia.
Treasurer of each of the registered investment
companies in the Pioneer Family of Mutual Funds.
Timothy T. Frost 41 Vice President of the Company since 1995.
Director and Vice President of Pioneer Omega
and Pioneer First Russia. Senior Vice
President of Pioneer International.
Previously, Managing Director of Financial
Services Volunteer Corps.
</TABLE>
25
<PAGE> 26
<TABLE>
<S> <C> <C>
Lucien Girard III 62 Vice President of the Company. Managing
Director and Chief Executive of Pioneer
Goldfields and TGL. Director of Pioneer Metals
and Technology, Inc.
Stephen G. Kasnet 50 Vice President of the Company since 1995.
President of Pioneer Real Estate since January
1996. Trustee of Pioneer Real Estate Shares and
Vice President of Pioneer Variable Contracts
Trust. Previously, Managing Director, First
Winthrop Corporation and Winthrop Financial
Associates. Chairman of the Board of Warren
Bancorp and Warren Five Cents Savings Bank and
Director of Bradley Real Estate, Inc.
John F. Lawlor 62 Vice President of the Company and Pioneering
Management. Director of Pioneer Goldfields, TGL,
Forest Starma, Amgun-Forest, Joint Stock Company
Pioneer Metals International, Pioneer Ireland
and each of the Irish Funds. Director and Vice
President of Pioneer Metals and Technology, Inc.
Alicja K. Malecka 49 Vice President of the Company and Pioneer Real
Estate. Senior Vice President of Pioneer
International. President of Pioneer First
Polish, the Polish Funds and Pioneer Investment
Poland, Sp.zo.o. Member of the Supervisory Board
of FSL.
Frank M. Polestra 70 Vice President of the Company since 1975.
President and Director of Pioneer Capital since
1981. President and Director of PSBIC.
William H. Smith, Jr. 60 Vice President of the Company and President and
Director of Pioneering Services since 1985. Vice
President and Director of Pioneer International.
Director of Pioneer Ireland and each of the
Irish Funds. Member of the Supervisory Board of
FSL. Previously, President of Securities Fund
Services, Inc. between 1981 and 1985.
</TABLE>
26
<PAGE> 27
<TABLE>
<S> <C> <C>
Joseph P. Barri 49 Secretary of the Company since 1978. Secretary
of each of the registered investment companies
in the Pioneer Family of Mutual Funds,
Pioneering Management, Pioneer Capital, Pioneer
Distributor, Pioneering Services, Pioneer
Omega, Pioneer First Russia and Pioneer
International. Senior Partner of the Boston law
firm, Hale and Dorr, counsel to the Company.
Robert P. Nault 32 General Counsel and Assistant Secretary of the
Company since 1995. Assistant Secretary of each
of the registered investment companies in the
Pioneer Family of Mutual Funds, Pioneering
Management, Pioneer Capital, Pioneer
Distributor, Pioneering Services, Pioneer
International and Pioneer Goldfields.
Previously, Junior Partner of the Boston law
firm, Hale and Dorr, counsel to the Company.
</TABLE>
27
<PAGE> 28
- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Incorporated by reference from the 1995 Annual Report under the
captions "Information Relating to Shares," "Dividends on Common Stock" and
"Price Range of Common Stock."
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from the 1995 Annual Report under the caption
"Five Year Summary of Selected Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Incorporated by reference from the 1995 Annual Report under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated by reference from the 1995 Annual Report under the caption
"Consolidated Financial Statements and Notes to Consolidated Financial
Statements" and "Report of Independent Public Accountants."
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
28
<PAGE> 29
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
ITEMS 10-13.
The information required for Part III in this Annual Report on Form
10-K is incorporated by reference from the Company's definitive proxy statement
for the Company's 1996 Annual Meeting of Stockholders. Such information will be
contained in the sections of such proxy statement captioned "Security Ownership
of Certain Beneficial Owners, Directors and Executive Officers," "Election of
Directors," "Directors' Meetings and Fees," "Committee Meetings," "Executive
Compensation," "Stock Option Grants and Exercises," "Certain Transactions" and
"Compliance with Section 16 of the Securities Exchange Act of 1934." Information
regarding executive officers of the Company is also furnished in Part I of this
Annual Report on Form 10-K under the heading "Executive Officers of the
Company."
29
<PAGE> 30
- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are included as part of this Annual Report
on Form 10-K.
1. Financial Statements:
<TABLE>
<S> <C>
Report of Independent Public Accountants................... 25*
Consolidated Statements of Income for the
Three years Ended December 31, 1995................... 26*
Consolidated Balance Sheets as of
December 31, 1995 and 1994............................ 27*
Consolidated Statements of Changes in
Stockholders' Equity for the Three
Years Ended December 31, 1995......................... 28*
Consolidated Statements of Cash Flows
for the Three Years Ended December 31, 1995........... 29*
Notes to Consolidated Financial Statements................. 30*
</TABLE>
--------------
* Refers to page number in 1995 Annual Report. Each such financial
statement or report is hereby incorporated herein by reference to the 1995
Annual Report which is filed as an exhibit to this report.
2. Financial Statement Schedules:
Schedule I: Condensed Financial Information
All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or the
Notes thereto.
3. Exhibits:
The exhibits filed with or incorporated into this report are listed on
the "Index to Exhibits" below.
(b) Reports on Form 8-K:
During the fiscal quarter ended December 31, 1995, the Company filed a
Current Report on Form 8-K, dated October 16, 1995, reporting that it had
commenced the sale, in a global public offering, of a minority interest in
Pioneer Goldfields Limited.
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 29, 1996.
THE PIONEER GROUP, INC.
By: /s/ John F. Cogan, Jr.
---------------------------------
John F. Cogan, Jr., President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ John F. Cogan, Jr. March 29, 1996
- -----------------------------------
John F. Cogan, Jr., Principal
Executive Officer and Director
/s/ William H. Keough March 29, 1996
- -----------------------------------
William H. Keough, Principal
Financial Officer and Principal
Accounting Officer
/s/ David D. Tripple March 29, 1996
- -----------------------------------
David D. Tripple, Director
/s/ Robert L. Butler March 29, 1996
- -----------------------------------
Robert L. Butler, Director
/s/ Philip L. Carret March 29, 1996
- -----------------------------------
Philip L. Carret, Director
/s/ Maurice Engleman March 29, 1996
- -----------------------------------
Maurice Engleman, Director
/s/ John H. Valentine March 29, 1996
- -----------------------------------
John H. Valentine, Director
/s/ Jaskaran S. Teja March 29, 1996
- -----------------------------------
Jaskaran S. Teja, Director
31
<PAGE> 32
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Sequential
Exhibit No. Page No.
- ------- ------- ----------
<S> <C> <C>
Certificate of Incorporation, as amended(10) 3.1 N.A.
By-Laws, as amended(2) 3.2 N.A.
Form of Management Contracts with Pioneer
Funds(1)(2) 10.1 N.A.
Form of Investment Company Service Agreements with
Pioneer Funds(2) 10.2 N.A.
Retirement Benefit Plan and Trust(2)(9) 10.3 N.A.
1988 Stock Option Plan, as amended(6)(9) 10.4 N.A.
Lease, dated as of July 3, 1991, between the
Trustees of 60 State Street and the Company(6) 10.5 N.A.
Form of Employment Agreements with Regional
Vice Presidents(3)(9) 10.6 N.A.
Finance Agreement between Teberebie Goldfields
Limited and Overseas Private Investment
Corporation ("OPIC")(4) 10.7 N.A.
Revised Form of Underwriting Contract with
Pioneer Funds(4) 10.8 N.A.
1990 Restricted Stock Plan(4)(9) 10.9 N.A.
Form of Management Contract with Pioneer U.S.
Government Trust(5) 10.10 N.A.
Form of Management Contract with Pioneer Money
Market Trust(5) 10.11 N.A.
</TABLE>
32
<PAGE> 33
<TABLE>
<S> <C> <C>
Deed of Warranty, dated December 3, 1987,
between the Government of the Republic
of Ghana, Teberebie Goldfields Limited
and The Pioneer Group, Inc.(5) 10.12 N.A.
Lease, dated February 2, 1988, between the
Government of the Republic of Ghana and
Teberebie Goldfields Limited(5) 10.13 N.A.
September 4, 1990, by and among Teberebie
Goldfields Limited, the Republic of Ghana,
Ghana Commercial Bank, Bank of Ghana,
The Pioneer Group, Inc., OPIC and The
Chase Manhattan Bank, N.A.(5) 10.14 N.A.
First Amended Finance Agreement, dated May 25, 1989,
as amended September 4, 1990, between Teberebie
Goldfields Limited and OPIC(5) 10.15 N.A.
Gold Refining and Purchasing Agreements
Acknowledgment executed by Teberebie Goldfields
Limited, the Republic of Ghana, Ghana Commercial
Bank, Bank of Ghana, The Pioneer Group, Inc.,
Overseas Private Investment Corporation, and
The Chase Manhattan Bank, N.A.(5) 10.16 N.A.
Map of Mining Operations in Tarkwa, Ghana(5) 10.17 N.A.
Collective Agreement between Teberebie Goldfields
Limited and the Ghana Mine Workers Union of
T.U.C.(7) 10.18 N.A.
Agreement, dated March 1, 1992, between Teberebie
Goldfields Limited and Johnson Matthey
Chemicals(7) 10.19 N.A.
Amendment, dated as of March 10, 1993, to Contract
dated March 1, 1992, between Teberebie Goldfields
Limited and Johnson Matthey Chemicals(7) 10.20 N.A.
Amendment, dated as of March 9, 1994, to contract
between Teberebie Goldfields Limited and Johnson
Matthey Chemicals(8) 10.21 N.A.
</TABLE>
33
<PAGE> 34
<TABLE>
<S> <C> <C>
Refining Agreement, dated as of August 23, 1993,
between Teberebie Goldfields Limited and
Metalor(8) 10.22 N.A.
OPIC Contract of Insurance Against Inconvertibility,
Expropriation and Political Violence between
OPIC and Pioneer Goldfields Limited, dated
August 12, 1993(8) 10.23 N.A.
Master Gold Trading and Hedging Services Agreement,
dated as of January 10, 1993 between Teberebie
Goldfields Ltd. and Billiten Marketing and
Trading B.V.(8) 10.24 N.A.
Agreement, dated as of September 29, 1993, between
the Chase Manhattan Bank, N.A. and Teberebie
Goldfields Ltd.(8) 10.25 N.A.
Letter Agreement, dated as of September 17, 1993,
between OPIC and Teberebie Goldfields Ltd.(8) 10.26 N.A.
Credit Agreement, dated as of June 1, 1993,
between Teberebie Goldfields Limited and
Skandinaviska Enskilda Banken(8) 10.27 N.A.
Agreement, dated May 10, 1994, between
Teberebie Goldfields Limited and
Johnson Matthey PLC(10) 10.28 N.A.
Contract, dated May 30, 1994, among Timber
Harvesting Equipment Sales, Inc., Joint-Stock
Company "Forest-Starma" and the Company(10) 10.29 N.A.
Contract, dated August 4, 1994, among Morbark
Northwest, Inc., Joint-Stock Company
"Forest-Starma" and the Company(10) 10.30 N.A.
Contract, dated May 25, 1994, among Caterpillar
Overseas S.A., Joint-Stock Company "Forest
Starma" and the Company(10) 10.31 N.A.
OPIC Commitment to Guarantee Loans to Forest
Starma, among OPIC, Forest Starma, Starma
Holding Company and the Company(10) 10.32 N.A.
</TABLE>
34
<PAGE> 35
<TABLE>
<S> <C> <C>
OPIC Contract of Insurance Against Business
Income Loss between OPIC and the Company,
effective September 30, 1992, as amended
(No. D581)(10) 10.33 N.A.
OPIC Contract of Insurance Against Business
Income Loss between OPIC and the Company,
effective September 30, 1992, as amended
(No. D582)(10) 10.34 N.A.
OPIC Contract of Insurance Against Inconvertibility,
Expropriation and Political Violence
between OPIC and the Company, effective
September 30, 1992 as amended (No.
D547)(10) 10.35 N.A.
OPIC Contract of Insurance Against Inconvertibility,
Expropriation and Political Violence
between OPIC and the Company, effective
September 30, 1992 (No. D545)(10) 10.36 N.A.
Consulting Agreement, dated as of January 2,
1995, between the Company and Pioneer
First Polish Trust Fund Joint Stock Company
("Pioneer Poland")(10) 10.37 N.A.
Services Contract, dated January 1, 1994,
between Pioneering Services Corporation
and Financial Services Limited(10) 10.38 N.A.
Agreement, dated June 25, 1992, between
Pioneer Poland and Bank Polska Kasa
Opieka S.A. ("Bank Pekao")(10) 10.39 N.A.
Agreement, dated as of June 25, 1992, between
Bank Pekao and Pioneer International
Corporation(10) 10.40 N.A.
Agreement, dated June 25, 1992, between
Bank Pekao and Pioneer Poland(10) 10.41 N.A.
Agreement, dated September 24, 1992, between
Pioneer Poland and Financial Services
Limited(10) 10.42 N.A.
</TABLE>
35
<PAGE> 36
<TABLE>
<S> <C> <C>
Letter Agreement dated February 28, 1995 between
the Company and The First National Bank of
Boston (10) 10.43 N.A.
Master Share Purchase Agreement dated as of
April 7, 1995 by and among Pioneer Omega,
Inc. and First Voucher Fund (11) 10.44 N.A.
Agreement dated as of April 7, 1995 by and among
Pioneer Omega, Inc. and DOM Investment
Company(11) 10.45 N.A.
Agreement dated as of April 7, 1995 by and among
Pioneer Omega, Inc. and Moscow Intenational
Business Centre Limited(11) 10.46 N.A.
Stockholders Agreement dated as of April 11, 1995
by and among the Company and Moscow
International Business Centre Limited(11) 10.47 N.A.
Collective Agreement dated as of July 3, 1995 between
Teberebie Goldfields Limited and the Ghana
Mineworker' Union of T.U.C.(12) 10.48 N.A.
Letter Agreement dated July 26, 1995 between
the Company and The First National Bank of
Boston (12) 10.49 N.A.
Contract of Insurance Against Incontrovertibility,
Expropriation and Political Violence dated
September 29, 1995 between the Overseas
Private Investment Corporation and the
Company(13) 10.50 N.A.
Commitment Letter dated September 29, 1995
between the Overseas Private Investment
Corporation, the Company and Teberebie
Goldfields Limited(13) 10.51 N.A.
</TABLE>
36
<PAGE> 37
<TABLE>
<S> <C> <C>
Letter Agreement dated October 20, 1995 between
the Company and The First National Bank of
Boston (13) 10.52 N.A.
Credit Facilities Commitment Letter Agreement
dated as of February 29, 1996 between
the Company and The First National Bank
of Boston 10.53
1995 Restricted Stock Plan(9) 10.54
Credit Agreement between Teberebie Goldfields
Limited and Skandinaviska Enskilda
Banken AB dated as of March 11, 1996 10.55
Computation of Earnings Per Share 11
1995 Annual Report to Stockholders (which is not deemed
"filed" except with respect to the portions
specifically incorporated herein by reference) 13
Subsidiaries 21
Consent of Arthur Andersen LLP 23
Financial Data Schedule 27
</TABLE>
- ---------------
(1) Except Pioneer America Income Trust (f/k/a Pioneer U.S. Government
Trust), the two series of Pioneer Money Market Trust, and Pioneer International
Growth Fund.
(2) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1986.
(3) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for year ended December 31, 1988.
(4) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for year ended December 31, 1989.
(5) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for year ended December 31, 1990.
(6) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
37
<PAGE> 38
(7) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
(8) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993.
(9) Management contract or compensatory plan or arrangement filed as an
exhibit to this Form pursuant to Items 14(a) and 14(c) of Form 10-K.
(10) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for year ended December 31, 1994.
(11) Incorporated herein by reference to the exhibits to the Company's
Quarterly Report on Form 10-Q for quarter ended March 31, 1995.
(12) Incorporated herein by reference to the exhibits to the Company's
Quarterly Report on Form 10-Q for quarter ended June 30, 1995.
(13) Incorporated herein by reference to the exhibits to the Company's
Quarterly Report on Form 10-Q for quarter ended September 30, 1995.
38
<PAGE> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of The Pioneer Group, Inc.:
We have audited, in accordance with generally accepted auditing
standards, the financial statements included in The Pioneer Group, Inc.'s
annual report to stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated March 11, 1996. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed in the index on page 30 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
March 11, 1996
<PAGE> 40
SCHEDULE 1
THE PIONEER GROUP, INC.
Condensed Financial Information
Year ended December 31, 1995, 1994 and 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Cash Dividends Paid
Year Ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash Dividend paid by Pioneer First Polish Trust Fund JSC, S.A.
to Pioneer International Corporation $8,279 $1,945 $ 0
Cash Dividend paid by Pioneer Investments Corporation to
The Pioneer Group, Inc. $ 214 $ 0 $2,110
Cash Dividend paid by Pioneer Goldfields Limited to
The Pioneer Group, Inc. $2,869 $ 0 $ 0
Cash Dividend paid by Pioneer Ventures L.P. to
Pioneer Capital Corporation $1,103 $ 0 $ 0
Cash Dividend paid by Teberebie Goldfields Limited to
Pioneer Goldfields Limited $3,150 $ 0 $ 0
</TABLE>
<PAGE> 1
Exhibit 10.53
[THE FIRST NATIONAL BANK OF BOSTON LETTERHEAD]
The Pioneer Group, Inc.
60 State Street
Boston, Massachusetts 02109
Credit Facilities Commitment Letter
Ladies and Gentlemen:
You have informed us that The Pioneer Group, Inc., a Delaware corporation
(the "Company"), and certain of its subsidiaries (collectively with the Company,
the "Borrowers") would like to have senior bank credit facilities of up to
$115,000,000 (the "Credit Facilities") available in order to refinance
indebtedness under existing credit facilities and to finance capital
expenditures. working capital and other general business purposes. You have
requested that The First National Bank of Boston (the "Bank") (a) act as agent
for the Credit Facilities, (b) commit to provide the full $115,000,000 principal
amount of the Credit Facilities and (c) agree to structure and syndicate the
Credit Facilities.
In connection with the foregoing, we are pleased to advise you of our
commitment to provide the full $115,000,000 principal amount of the Credit
Facilities upon the terms and subject to the conditions set forth or referred to
in this commitment letter (the "Commitment Letter") and in the Summary of
Proposed Terms and Conditions attached hereto as Exhibit A (the "Term Sheet").
Those matters which are not covered by or made clear in the Commitment Letter
are subject to future mutual agreement of the parties.
It is agreed that we (a) will act as the agent, the arranger and the
syndication manager for the Credit Facilities and (b) will, in such capacities,
perform the duties and exercise the "authority customarily associated with such
roles. It is further agreed that no additional agents, co-agents, arrangers or
syndication managers will be appointed, and no lender under the Credit
Facilities will receive compensation other than as set forth herein and in the
Term Sheet in order to obtain its commitment to participate in the Credit
Facilities, unless you and we so agree.
<PAGE> 2
The Pioneer Group, Inc. -2- February 22, 1996
We reserve the right, prior to or after the execution of definitive
documentation for the Credit Facilities, to syndicate all or a portion of our
commitment hereunder to one or more financial institutions reasonably
satisfactory to each of you and us. Upon the acceptance by you of the commitment
of any lender to provide a portion of the Credit Facilities, we shall be
released from a portion of our commitment hereunder in an aggregate amount equal
to the commitment of such lender. You agree actively to assist us in achieving a
timely syndication that is satisfactory to us, such assistance to include, among
other things, direct contact during the syndication between the senior officers,
representatives and advisors of each of the Borrowers, on the one hand, and
prospective lenders, on the other hand.
We will manage all aspects of the syndication, including the selection of
lenders, the determination of when we will approach potential lenders, any
naming rights and the final allocations of the commitments among the lenders. To
assist us in our syndication efforts, you agree (a) to provide all financial and
other information in your possession with respect to the Borrowers and the
transactions contemplated by this Commitment Letter and the Term Sheet.
including but not limited to financial projections (the "Projections") relating
to the foregoing, and (b) to assist, and to cause your affiliates and advisors
to assist, us in the preparation of a confidential information memorandum and
other marketing materials to be used in connection with the syndication.
You agree that, prior to and during the syndication of the Credit
Facilities, there shall be no offering, placement or arrangement of any
competing issues of debt securities or commercial bank facilities of the
Borrowers or any of their respective subsidiaries.
You hereby represent and covenant that (a) all information (other than
the Projections) concerning the Borrowers and the transactions contemplated by
this Commitment Letter and the Term Sheet (the "Information") that has been or
will be made available to us by you or any of your representatives in connection
with the transactions contemplated by this Commitment Letter and the Term Sheet,
when taken as a whole, is or will be complete and correct in all material
respects and does not or will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements are made and (b) the Projections that have been or will be
made available to us by you or any of your representatives in connection with
the transactions contemplated by this Commitment Letter and the Term Sheet have
been and will be prepared in good faith based upon assumptions believed by you
to be reasonable. The representations and covenants set forth in this paragraph
shall be superseded by the definitive documentation with respect to the Credit
Facilities upon the execution and delivery thereof.
As consideration for our commitment hereunder and our agreement to
structure, arrange and syndicate the Credit Facilities and to provide advisory
services in connection therewith, you agree to pay to us the fees as set forth
in the Term Sheet and in the Fee Letter
<PAGE> 3
The Pioneer Group, Inc. -3- February. 22, 1996
dated the date hereof and delivered herewith (the "Fee Letter"). Once paid, such
fees shall not be refundable under any circumstances.
The commitments of the Bank hereunder is conditioned upon the factors set
forth in the Term Sheet, as well as the absence of (i) any material adverse
change in the business, assets, financial condition, income or prospects of the
Company, its core mutual fund business and Pioneer Goldfields Limited and
related ownership entities since the date of the last audited financial
statements previously furnished to the Bank, (ii) any material change in the
ability of the Company and its subsidiaries to operate in accordance with the
financial projections furnished to the Bank or to comply with the proposed
financial covenants, (iii) any material misstatements in or omissions from the
materials that have previously been furnished by the Company to the Bank for the
Bank' s review and (iv) any material change in governmental regulation or policy
affecting the Bank, the other lenders, the Company, its subsidiaries or the
proposed Credit Facilities or material disruption or material adverse change in
financial, banking or capital markets since the date hereof.
In addition, the commitments of the Bank hereunder are subject to the
negotiation, execution and delivery of definitive documentation with respect to
the Credit Facilities satisfactory to the Bank and its counsel. Such
documentation shall contain such indemmties, covenants, representations and
warranties, events of default, conditions, definitions and other terms and
conditions as shall be satisfactory to the Bank, the other lenders, the
Borrowers and their respective counsel. If, in the course of documenting the
transaction and the Bank's continued analysis of financial and other information
relating to the Company and subsidiaries, the Bank discovers that any of the
foregoing conditions will in its judgment not be met, the Bank reserves the
right to terminate any commitment it may have hereunder respect to the proposed
Credit Facilities.
Whether or not the transactions contemplated hereby are consummated, you
agree to indemnify and hold harmless the Bank and the other lenders under the
Credit Facilities and our respective directors, officers, employees, affiliates,
agents and controlling persons from and against any and all losses, claims,
damages, liabilities and expenses, joint or several, to which any such person
may become subject arising out of or in connection with this Commitment Letter,
the Fee Letter, the Term Sheet, the Credit Facilities, the use of proceeds of
the loans thereunder or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing, regardless of
whether any of such indemnified parties is a party thereto, and to reimburse
each of such indemnified parties upon demand for any legal or other expenses
incurred in connection with investigating or defending any of the foregoing;
provided, however, that the foregoing indemnity will not, as to any indemnified
party, apply to losses, claims, damages, liabilities or related expenses to the
extent they have resulted from the willful misconduct or gross negligence of the
proposed indemnitee. No indemnified person shall be liable for any indirect or
consequential damages in connection with its activities related to the Credit
Facilities.
<PAGE> 4
The Pioneer Group, Inc. -4- February 22, 1996
In addition, whether or not the transactions contemplated hereby are
consummated, you agree to reimburse us from time to time on demand for
out-of-pocket expenses (including, but not limited to, expenses of our due
diligence investigation, syndication expenses. travel expenses and reasonable
fees, disbursements and other charges of counsel), in each case incurred in
connection with the Credit Facilities and the preparation of this Commitment
Letter, the Fee Letter, the Term Sheet, the definitive documentation for the
Credit Facilities and the negative pledge arrangements in connection therewith.
This Commitment Letter and our commitment hereunder shall not be
assignable by you without our prior written consent, and any purported
assignment shall, without such consent, be void. This Commitment Letter may not
be amended, and no provision hereof shall be waived or modified, except by an
instrument in writing signed by the Bank and you. This Commitment Letter may be
executed in any number of counterparts, which together shall constitute one
agreement. Delivery of an executed signature page to this Commitment Letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Commitment Letter. This Commitment Letter is intended to be
solely for the benefit of the parties hereto and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than the
parties hereto. This Commitment Letter shall be governed by and construed in
accordance with the laws (other than the conflict of laws rules) of the
Commonwealth of Massachusetts.
This Commitment Letter and the Fee Letter set forth our proposal with
respect to the Credit Facilities and shall be considered withdrawn if we have
not received the enclosed copy of this Commitment Letter and Fee Letter signed
by you by 5:00 p.m. on February 29, 1996, together with payment of the fee
required upon delivery of this Commitment Letter. If for any reason the
Borrowers, the proposed group of lenders and us have not been able to agree to
definitive terms and conditions and enter into a definitive agreement with
respect to the Credit Facilities prior to April 30, 1996, this proposal shall be
considered terminated; provided, however, that, subject to the provisions of the
immediately preceding paragraph, the compensation, indemnification and
reimbursement provisions contained herein and in the Fee Letter shall remain in
full force and effect notwithstanding the termination of this Commitment Letter
or our commitment hereunder.
The Bank is pleased to have been given the opportunity to assist you in
connection with this financing.
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Stewart A Neff
----------------------------
Title: Managing Director
<PAGE> 5
The Pioneer Group, Inc. -5- February 22, 1996
The foregoing is hereby
agreed to and accepted:
THE PIONEER GROUP, INC.
By /s/ William M. Keough
---------------------------------------------
Title: Chief Financial Officer and Treasurer
Dated: February 29, 1996
<PAGE> 6
EXHIBIT A
THE PIONEER GROUP, INC.
Summary of Proposed Terms and Conditions
February 22, 1996
The proposed terms and conditions summarized herein are for discussion purposes
only and do not constitute an offer, agreement or commitment to lend. The actual
terms and conditions upon which Bank of Boston might extend credit are subject
to satisfactory review and completion of documentation, satisfactory completion
of due diligence and other such terms and conditions as may be determined by
Bank of Boston and its counsel.
Borrower: The Pioneer Group, Inc. and designated subsidiaries
Agent: The First National Bank of Boston ("FNBB").
Lenders: FNBB and one or more other financial institutions reasonably
acceptable to Borrower and Agent.
Credit Facilities: $115,000,000, comprised of:
A) $35,000,000 Revolver/Term Loan facility;
B) $80,000,000 Revolving Credit facility.
Closing: No later than April 30, 1996.
A) $35,000.000 Revolver/Term Loan facility:
Purpose: To finance B-share sales commission paid to brokers under
the company' s deferred-load program.
Final Maturity: Revolver will mature 364 days from Closing,
subject to annual renewal by the Borrower and the
Lenders, each at their sole discretion. In the event
that the revolver is not renewed, at maturity, it will
automatically convert to a five (5) year Term Loan.
It is understood that the Lenders will renegotiate the
amount and maturity of the Credit Facility annually. The
Credit Facility would
<PAGE> 7
convert to term only in the event that the Lenders have not
agreed to extend the Revolver for financing new sales
commissions.
Availability/
Amortization: During the period in which the facility is a Revolver.
subject to the Borrowing Base. the Borrower may borrow the
amount of B-share broker commissions paid plus accrued
interest on the B-share loan facility less the amount of
B-share Distribution (12b-1) Fee and Redemption (CDSC) Fees
collected each month. Prepayment is required equal to the
excess of Distribution and Redemption (CDSC) Fee collections
over commission payments for the period.
Upon conversion of the facility to a Term Loan, the debt
will amortize in equal quarterly principal payments over the
five (5) year term period. Additional payments will be
required in an amount equal to the excess, if any, of the
cash collections of B-share Distribution Fees and Redemption
(CDSC) Fees in any period over the scheduled amortization
payment due in that period.
Borrowing Base: Borrowings will not exceed the lesser of:
A) $35,000,000 ("Revolver Commitment Amount");
B) Aggregate Unreimbursed Sales Commissions (defined as
total B- share commission payments made to brokers plus
accrued interest less total B-share Distribution Fees
and Redemption (CDSC) Fees collected); or
C) Total Estimated Collectible Amount (to be defined as all
potential future collections of distribution fees and
redemption fees over the remaining life of all B
shares). This will be calculated utilizing a rolling six
month average of net asset value, weighted accordingly
based upon which funds hold the most B shares.
Assumptions regarding redemptions, redemptions that are
dividend reinvest shares, and withdrawals under
systematic withdrawal plans will also be based upon the
actual results experienced over the past rolling six
month period. This calculation will be made every
quarter.
Interest Rate: Borrower's option of:
a) Agent' s Alternate Base Rate; or
b) Eurodollar Rate + 1.25 % p.a.
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<PAGE> 8
Agent's Alternate Base Rate shall mean the greater of: (i)
FNBB's Base Rate, and (ii) the Federal Funds Effective Rate
+ 0.50% p.a.
Interest Payments
and Calculations: Interest shall be calculated on the basis of a 360-day year.
In the case of loans bearing interest at the Alternate Base
Rate, interest shall be payable monthly in arrears. In the
case of loans bearing interest at a Eurodollar rate,
interest shall be payable at the end of the applicable
interest period (for interest periods of one, two, or three
months) or at three month intervals (for interest periods of
six months).
Interest Rate
Protection: Borrower shall maintain interest rate protection agreements,
in form and substance acceptable to the Agent, covering at
least 60% of the Borrower's outstanding indebtedness under
the $35,000.000 Revolver/Term Loan facility, calculated as
of the Closing Date and as of each calendar year end
thereafter. The minimum term of such interest rate
protection agreements shall be five years.
Commitment Fee: 0.375 % per annum on the unused portion of the Revolver
Commitment Amount, payable quarterly in arrears.
B) $80.000.000 Revolving Credit facility:
Purpose: Refinancing existing indebtedness, and for working capital
and general corporate purposes.
Final Maturity: Payable in full five (5) years from Closing.
Mandatory
Prepayment: Revolving Credit facility will be required to be prepaid and
will be subject to a permanent reduction in availability by
an amount equal to 50% of the net proceeds from any equity
offering of the Borrower's ownership in Pioneer Goldfields
Limited and related ownership entities.
Borrowing Options: Interest rates will be based on the Alternate Base Rate
("Base Rate Loans") or the Eurodollar Rate ("Eurodollar Rate
Loans"), at the Borrower's option, plus the Applicable
Margin.
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<PAGE> 9
Agent's Alternate Base Rate shall mean the greater of: (i)
FNBB's Base Rate, and (ii) the Federal Funds Effective Rate
+ 0.50% p.a.
Applicable Margin: Beginning at Closing through the first anniversary of the
Closing, the Applicable Margin for Base Rate Loans shall be
0.00% p.a. and the Applicable Margin for Eurodollar Loans
shall be 1.25 % p.a. Thereafter, the Applicable Margin shall
be tied to the Borrowers' financial performance. as detailed
in the following pricing grid:
<TABLE>
<CAPTION>
Applicable Margin
----------------------------
Recourse Debt/EBITDA Eurodollar + Base+
-------------------- ------------ -----
<S> <C> <C>
[greater than symbol] 2.50x 1.50% 0.00%
2.00x - 2.50x 1.25% 0.00%
[less than symbol] 2.00x 0.75% 0.00%
</TABLE>
For the purposes of measuring the above:
- Recourse Debt shall include all indebtedness for which
the Borrower is an obligor or a guarantor, excluding
indebtedness related to B-share financing.
- EBITDA shall include only the earnings before interest,
taxes, depreciation, and amortization of the Borrower' s
Core Mutual Fund business, excluding any B-share-related
cash flows, and excluding dividends received from any
other Borrower subsidiary.
Interest Payments
and Calculations: Interest shall be calculated on the basis of a 360 day-year.
In the case of loans bearing interest at the Alternate Base
Rate, interest shall be payable monthly in arrears. In the
case of loans bearing interest at a Eurodollar rate,
interest shall be payable at the end of the applicable
interest period (for interest periods of one, two, or three
months) or at three month intervals (for interest periods of
six months).
Commitment Fee: 0.375 % per annum on the unused portion of the Revolving
Credit commitment amount, payable quarterly in arrears.
A&B) Credit Facilities:
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<PAGE> 10
Security: Unsecured. with a negative pledge on the stock of (i) all
subsidiaries which comprise the Borrower's Core Mutual Fund
business, and (ii) Pioneer Goldfields Limited and related
ownership entities.
Lenders will release the negative pledge on the stock of
Pioneer Goldfields Limited and related ownership entities
upon (i) repayment and cancellation in full of the
$80,000,000 Revolving Credit facility., and (ii) a minimum
prior twelve months Core Mutual Fund EBITDA of $30,000,000.
Financial
Covenants: Usual and customary for facilities of this type, including
but not limited to:
i) Maximum ratio of (a) Recourse Debt at all times to (b)
Core Mutual Fund EBITDA, calculated on a trailing four
quarter basis, of 3.00x;
ii) Minimum ratio of (a) Core Mutual Fund EBITDA plus
Redemption (CDSC) Fees to (b) Total Debt Service of
4.00x tested each quarter on a trailing four quarter
basis;
iii) Minimum Consolidated Tangible Net Worth at all times
of $114,000,000, plus 50% of net income (but not net
losses) for each quarter.
Representations
And Warranties: Usual and customary for facilities of this type, including
but not limited to:
i) corporate existence;
ii) corporate and governmental approval;
iii) environmental compliance;
iv) no material adverse change;
v) ERISA compliance;
vi) no material litigation;
vii) payment of taxes; and
viii) full disclosure.
Other Covenants: Usual and customary for transactions of this type, including
but not limited to:
i) consolidated and consolidating financial reporting;
ii) delivery of annual projections;
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<PAGE> 11
iii) maintenance of insurance (including OPIC insurance);
iv) payment of taxes;
v) maintenance of mutual fund management contracts;
vi) maintenance of fee structure with respect to dealer
commissions and redemption fees on at least as
favorable terms;
vii) maintenance of books and records;
ix) limitations on:
a) liens (no liens on the stock of (i) the
subsidiaries which comprise the Borrower's Core
Mutual Fund business, and (ii) Pioneer Goldfields
Limited and related ownership entities),
b) sale or disposition of assets (maintenance of
controlling interest in Pioneer Goldfields Limited
and related ownership entities, and maintenance of
current ownership levels of all subsidiaries which
comprise the Core Mutual Fund business), and
c) mergers and acquisitions (relating to the Borrower
and the Core Mutual Fund business);
d) debt with respect to the Core Mutual Fund
business.
viii) standards for transactions with affiliates; and
ix) compliance with applicable laws and regulations
(ERISA, environmental, labor and similar laws).
Conditions
Precedent to
Closing: Usual and customary for transactions of this type, including
but not limited to:
i) completion of due diligence in scope and determination
satisfactory to the Agent and the Lenders in their
sole discretion;
ii) negotiation, execution and delivery of the Credit
Agreement, Notes, negative pledges, and all related
legal documentation satisfactory to the Lenders;
iii) Agent is named as Loss Payee on any OPIC or other
political risk insurance policies;
iv) no material adverse change in the financial condition,
business or prospects of the Borrower or its
subsidiaries shall have occurred; and
v) minimum assets under management of $11 billion.
-6-
<PAGE> 12
Event of
Default: Usual and customary for transactions of this type, including
but not limited to:
i) nonpayment of principal or interest;
ii) breach of any affirmative or negative covenants;
iii) misrepresentation by the Borrower;
iv) cross default provisions to other agreements or
obligations;
v) change of composition of senior management team or
Board of Directors;
vi) loss of mutual fund management contracts representing
more than 15 % of assets under management;
vii) failure to renew distribution plans on at least as
favorable terms and fees;
viii) failure to maintain controlling interest in Pioneer
Goldfields Limited and related ownership entities;
ix) material adverse change; and
x) certain bankruptcy, insolvency, ERISA and judgment
defaults, with appropriate limitations and time
periods.
Expenses: All fees and disbursements of legal counsel for the Agent
incurred in the negotiation and preparation of all necessary
documentation and all out-of-pocket expenses related to the
Credit Facilities (including syndication expenses) shall be
for the account of the Borrower whether or not the
transactions referred to herein are ultimately consummated.
Assignments/
Participations: Assignments of each Lender's commitment, fully or in part,
are permitted with the prior consent of the Borrower, which
consent will not be unreasonably withheld, provided that
each such assignment will be in a minimum amount of
$5,000,000.
Participations in each Lender' s commitment may be sold in
any amount, provided that the voting rights granted to any
such participant will be limited to those requiring
unanimous votes under the governing loan documentation.
Syndication: Borrower will provide all information (including pro forma
financial projections for the proposed Credit Facilities),
in a form reasonably acceptable to the Agent, necessary for
the preparation of an information memorandum describing the
Borrower, the Credit Facilities and any related
transactions. Such package will be distributed on a
confidential basis to selected financial institutions. In
-7-
<PAGE> 13
addition, the management of the Borrower will, at the
request of the Agent. hold themselves and their advisors
available at reasonable times to meet with potential lenders
and to answer questions during the syndication process.
Increased Costs/
Change of
Circumstances: The credit agreement will contain provisions protecting the
Lenders in the event of unavailability of funding,
illegality, capital adequacy requirements, increased costs,
and funding losses.
Voting Rights: Required Lenders for waivers and amendments shall mean
Lenders holding at least 51% of the outstanding loans and
unused commitments under the Credit Facilities: provided,
however, that 100% of the Lenders are required to consent to
increases of commitments, reductions in interest rates or
fees, extensions of maturity, changes in the pricing
structure of the Borrower's B-share program, or changes of
the percentage required to approve such matters.
Governing Law: The Commonwealth of Massachusetts.
-8-
<PAGE> 14
Exhibit 10.54
THE PIONEER GROUP, INC.
1995 RESTRICTED STOCK PLAN
1. PURPOSE.
The purpose of the 1995 Restricted Stock Plan (the "Plan") is to secure for
The Pioneer Group, Inc. (the "Company") and its shareholders the benefits
arising from capital stock ownership by key employees of the Company who have
contributed and are expected to contribute to the Company's future growth and
success. Except where the context otherwise requires, the term "Company" shall
include any subsidiaries of the Company. For purposes of the Plan, the term
"subsidiary" means a corporation fifty percent (50%) or more of whose voting
securities are directly or indirectly owned by the Company.
2. ADMINISTRATION AND AWARDS.
(a) Administration. Awards (as defined below) granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the Company and shall
meet the requirements of Section 5 of the Plan. The Plan shall be administered
by the Board of Directors of the Company, whose construction and interpretation
of the terms and provisions of the Plan shall be final and conclusive. The Board
of Directors may in its sole discretion make awards for the purchase of shares
of the Company's common stock, $.10 par value per share ("Common Stock"),
pursuant to Section 5. The Board shall have authority, subject to the express
provisions of the Plan, to construe the respective Awards, and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective Awards, which need not be
identical, and to make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration of the Plan. The Board
of Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award in the manner and to the extent it
shall deem expedient to carry the Plan into effect and it shall be the sole and
final judge of such expediency. No director or person acting pursuant to
authority delegated by the Board of Directors shall be liable for any action or
determination made in good faith. The Board of Directors may, to the full extent
permitted by or consistent with law or regulation (including without limitation
Rule 16b-3 of the Securities Exchange Act of 1934 or any successor rule ("Rule
16b- 3")), delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee. In addition, to the full extent permitted by or
consistent with law or regulation (including without limitation Rule 16b-3), the
Board of Directors or such Committee may delegate authority to the President of
the Company to make Awards to employees of the Company who are not officers or
directors of the Company.
-1-
<PAGE> 15
(b) Grant of Awards to Directors. The selection of a director as a
participant and the size of an Award to such director shall be determined by the
Board of Directors, of which a majority, as well as a majority of the directors
acting in the matter, shall be "disinterested persons" (as hereinafter defined).
For the purposes of the Plan, a director shall be deemed to be "disinterested"
only if such person qualifies as a "disinterested person" within the meaning of
Rule 16-3 as such term is interpreted from time to time.
3. ELIGIBILITY.
Awards under the Plan may be made only to persons who are determined by the
Board of Directors to be key employees of the Company. The term "employees"
shall include officers and directors who are full-time employees of the Company
as well as other full-time employees of the Company.
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 8 below, the maximum number of
shares of Common Stock of the Company which may be issued and sold under the
Plan is 600,000 shares, PROVIDED THAT the maximum number of shares that may be
issued under the Plan to any person in any calendar year shall not exceed 50,000
shares. Such shares may be (i) authorized and unissued shares or (ii) issued and
thereafter acquired by the Company or (iii) subject to the requirements of
16b-3, tendered back to the Company or withheld by the Company for tax
withholding obligations pursuant to Section 12. Any shares of Common Stock
subject to an Award which are not purchased by the recipient of the Award, or
which are purchased by the recipient of the Award but later repurchased by the
Company in accordance with the terms of the Award or the Plan, shall again be
available for purposes of the Plan.
5. AWARDS.
(a) Restricted Stock Award. A restricted stock award ("Award") shall
consist of the sale and issuance by the Company of shares of Common Stock, and
purchase by the recipient of such shares, subject to the terms, conditions and
restrictions described in the document evidencing the Award and in this Plan.
(b) Execution of Agreement. As a condition to an Award under the Plan, each
recipient of an Award shall execute an agreement in such form, which may differ
among recipients, as shall be specified by the Board of Directors at the time of
such Award.
(c) Price. The Board of Directors shall determine the price, if any, at
which shares of Common Stock shall be awarded to recipients under the Plan,
provided that such price shall in no event be less than the par value of the
Common Stock. The purchase price may vary among the participants. The Board of
-2-
<PAGE> 16
Directors may, in its discretion, issue shares under the Plan at a purchase
price below the then fair market value. If a purchase price is required to be
paid, it shall be paid in cash or by check payable to the order of the Company
at the time that the Award is accepted by the recipient.
(d) Number of Shares. The Award shall specify the number of shares of
Common Stock granted thereunder.
(e) Ownership of Shares. Each recipient of an Award shall have, after
delivery to him or her or to an escrow agent (the "Escrow Agent") on his or her
behalf of a certificate or certificates for the number of shares of Common Stock
awarded, absolute ownership of such shares including the right to vote them and
to receive dividends on the shares, subject, however, to the risk of forfeiture
and the terms, conditions and restrictions described in the Plan and in the
instrument evidencing the grant of the Award.
(f) Restrictions on Transfer. In addition to such other terms, conditions
and restrictions upon Awards as shall be imposed by the Board of Directors, all
shares issued pursuant to an Award shall be subject to the following
restrictions:
(1) All shares of Common Stock subject to an Award (including any
shares issued pursuant to paragraph (g) of this Section 5) shall be subject
to certain restrictions on disposition and obligations of resale to the
Company as provided in subparagraph (2) below for the period specified in
the document evidencing the Award, and shall not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until such
restrictions lapse. The period during which such restrictions are
applicable is referred to as the "Restricted Period"
(2) In the event that a recipient's employment with the Company is
terminated within the Restricted Period, whether such termination is
voluntary or involuntary, with or without cause, for any reason other than
death, Disability or Retirement (except as provided in Section (f)(3)
below) (as such terms are defined below) of the recipient, the Company
shall have the right and option for a period of ninety (90) days following
such termination of employment to elect to buy for cash that number of the
shares of Common Stock purchased under the Award as to which the
restrictions on transfer and the forfeiture provisions contained in the
Award had not lapsed at the time of such termination, at a price equal to
the price per share originally paid by the recipient. If such termination
of employment occurs within the Restricted Period, and there are less than
ninety (90) days remaining in the Restricted Period, the prohibition
against any sale, assignment, transfer or other disposition of the
recipient's Common Stock, provided in subparagraph (f)(1) of this Section
5, shall continue to apply until the expiration of the Company's 90-day
option period set forth in this subparagraph (f)(2).
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<PAGE> 17
(3) If such recipient's employment is terminated within the Restricted
Period by reason of his or her death, Disability or Retirement (except as
provided below), the Company's right to repurchase shares issued to such
recipient under the Plan shall cease and terminate at the time of such
death, Disability or Retirement; and such shares, from and after the date
of such death, Disability or Retirement, shall no longer be restricted by
the provisions of subparagraph (f)(1) of this Section 5 and may thereafter,
subject to compliance with law, be sold, assigned, transferred or otherwise
disposed of during the balance of the Restricted Period. For purposes of
this Plan, "Disability" shall have the meaning set forth in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended. "Retirement"
shall mean termination of employment after reaching the age 65, provided
that such termination shall not be for cause (as determined in good faith
by the Board of Directors of the Company or the Committee). Notwithstanding
the foregoing, a recipient who after Retirement or Disability, directly or
indirectly, (a) competes with the business of the Company as an individual
proprietor, officer, director, shareholder, partner, joint venturer,
employee, investor, lender, or in any other capacity whatsoever (other than
as the holder of not more than five percent (5%) of the total outstanding
stock of a publicly held company); or (b) recruits or other solicits or
induces employees of the Company to terminate their employment with, or
otherwise cease their relationships with, the Company, or (c) contracts,
services or approaches any customer or account which was a customer or
account of the Company during the last year of the recipient's employment
by the Company, shall be deemed to have terminated employment for purposes
of this Plan otherwise than by means of Retirement or Disability, on the
later of (i) the date of the recipient's Retirement or Disability or (ii)
the date determined by the Company to have been the date such activity
commenced. As used herein, "business of the Company" shall refer to its
business as described in the most recent Annual Report of the Company on
Form 10-K filed with the Securities and Exchange Commission prior to the
commencement by the recipient of any activity referred to in the preceding
sentence. If this provision against competition is found by any court to be
unreasonable, because it is (or any party of it is) too broad, then such
provision shall nevertheless remain effective, but shall be considered
amended to such extent (such as time, area or line of business) as may be
considered reasonable by such court, and as so amended then shall be
enforced.
(4) Notwithstanding subparagraphs (1), (2) and (3) above, the Board of
Directors may, in its discretion, either at the time that an Award is made
or at any time thereafter, waive its right to repurchase shares of Common
Stock upon the occurrence of any of the events described in this Section
5(f) or remove or modify any part or all of the restrictions. In addition,
the Board of Directors may, in its discretion, impose upon the recipient of
an Award at the time of such Award, such other
-4-
<PAGE> 18
restrictions on any shares of Common Stock issued pursuant to such Award as
the Board may deem advisable and in the best interests of the Company and
its shareholders.
(g) Additional Shares. Any shares received by a recipient of an Award
as a stock dividend on, or as a result of stock splits, combinations,
exchanges of shares, reorganizations, mergers, consolidations or otherwise
With respect to, shares of Common Stock received pursuant to such Award
shall have the same status and shall bear the same restrictions, all on a
proportionate basis, as the shares initially purchased pursuant to such
Award.
(h) Transfers in Breach of Award; Repurchased Shares. If any transfer
of shares purchased pursuant to an Award is made or attempted contrary to
the terms of the Plan and of such Award, the Board of Directors shall have
the right to purchase those shares for the account of the Company from the
owner thereof or his transferee at any time before or after the transfer at
the price paid for such shares by the person to whom they were awarded
under the Plan. In addition to any other legal or equitable remedies which
it may have, the Company may enforce its rights by specific performance to
the extent permitted by law. The Company may refuse for any purpose to
recognize as a shareholder of the Company any transferee who receives any
shares contrary to the provisions of the Plan and the applicable Award, and
the Company may retain and/or recover all dividends on such shares which
were paid or payable subsequent to the date on which the prohibited
transfer was made or attempted. Any shares which the Board of Directors
elects to repurchase under the Plan for the account of the Company shall be
tendered to the Company by the delivery of certificates therefor, duly
endorsed in blank, at the Company's principal office on the date and at the
time specified by the Board of Directors. Payment for repurchased shares
shall be made by the Company at the time of delivery of the certificate(s)
representing the repurchased shares.
(i) Resale Restrictions. Certain officers of the Company, who may be
deemed to be "affiliates", may resell shares of the Company's Common Stock
purchased under the Plan only subject to certain restrictions imposed by
the Securities Act of 1933 and Rule 144 promulgated thereunder. In
addition, in order to obtain the benefits of Rule 16b-3, certain officers
of the Company, who may be deemed to be "insiders" under Rule 16b-3 may not
sell any shares of the Company's Common Stock for at least six months after
the date an award is granted. Any officer purchasing shares under the Plan
should consult with legal counsel prior to doing so.
(j) Additional Award Provisions. The Board of Directors may, in its
sole discretion, include additional provisions in any Award granted under
the Plan.
-5-
<PAGE> 19
6. GENERAL RESTRICTIONS.
(a) Investment Representations. The Company may require any person to whom
an Award is made, as a condition of purchasing the shares subject to such Award
or exercising such option, to give written assurances in substance and form
satisfactory to the Company to the effect that such person is acquiring the
Common Stock subject to the Award for his or her own account for investment and
not with any present intention of selling or otherwise distributing the same,
and to such other effects as the Company deems necessary or appropriate in order
to comply with federal and applicable state securities laws. Certificates for
shares of Common Stock delivered pursuant to Awards shall bear the following
legend:
"The shares of Common Stock represented by this certificate are subject to
forfeiture, prohibition against transfer or assignment and certain other
restrictions set forth in the 1995 Restricted Stock Plan of The Pioneer
Group, Inc. and in the Restricted Stock Award dated as of granted
by The Pioneer Group, Inc. to the owner of this certificate. A copy of the
1995 Restricted Stock Plan and the above-described Restricted Stock Award
are available for inspection, without charge, at the offices of The Pioneer
Group, Inc."
(b) Compliance with Securities Laws. Each Award shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such Award
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares thereunder, such
Award may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualifications.
7. RIGHTS AS A SHAREHOLDER.
The recipient of an Award shall have no rights as a shareholder with
respect to any shares covered by the Award until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
-6-
<PAGE> 20
8. ADJUSTMENT PROVISIONS.
(a) If the outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed
with respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other distribution with respect to such shares of Common
Stock or other securities, or if the Company shall distribute any substantial
amount of its assets with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in the
maximum number and kind of shares identified in Section 4 of the Plan.
(b) Adjustments under this Section 8 will be made by the Board of
Directors, whose determination as to what adjustments, if any, will be made and
the extent thereof will be final, binding and conclusive. No fractional shares
will be issued under the Plan on account of any such adjustments.
9. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any Award shall confer upon any
recipient of an Award any right with respect to the continuation of his or her
employment by the Company or interfere in any way with the right of the Company
at any time to terminate such employment or to increase or decrease the
compensation of the recipient. Whether an authorized leave of absence, or
absence, or absence in military or government service shall constitute
termination of employment shall be determined by the Company at the time of such
absence.
10. OTHER EMPLOYEE BENEFITS.
The value of an Award granted to an employee or the sale of shares received
pursuant to an Award will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
11. AMENDMENT OF THE PLAN.
The Plan may at any time be terminated, modified or amended by the holders
of a majority of the then outstanding voting shares of the Company. The Board of
Directors may at any time, and from time to time, terminate, modify or amend the
Plan in any respect, except that without the approval of the shareholders of the
Company the Board of Directors may not make any amendment which would (i) cause
the Plan to no longer comply with Rule 16b-3 or
-7-
<PAGE> 21
any successor to the foregoing or (ii) require shareholder approval under any
applicable listing requirement. The termination or any modification or amendment
of the Plan shall not, without the consent of a recipient of an Award, affect
his or her rights under an Award previously made to him or her. With the consent
of the recipient of the Award, the Board of Directors may amend outstanding
Awards in a manner not inconsistent with the Plan. The Board of Directors shall
have the right to amend or modify the terms and provisions of the Plan and of
any outstanding Award to the extent necessary to ensure the qualification of the
Plan under Rule 16b-3 or any successor rule.
12. WITHHOLDING.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the participant any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon any Award
under the Plan. Subject to the prior approval of the Company, which may be
withheld by the Company in its sole discretion, the participant may elect to
satisfy such obligations, in whole or in part, (i) by directing the Escrow Agent
to forward to the Company a sufficient number of shares of Common Stock
otherwise deliverable by the Escrow Agent to the participant pursuant to the
grant of an Award or (ii) by delivering to the Company shares of Common Stock
already owned by the participant. The shares so delivered by the Escrow Agent or
the participant shall have a fair market value equal to such withholding
obligation. The fair market value of the shares used to satisfy such withholding
obligation shall be determined by the Company as of the date that the amount of
tax to be withheld is to be determined. A participant who has made an election
pursuant to this Section 12(a) may only satisfy his or her withholding
obligation with shares of Common Stock which are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of any persons who are
required to file reports under Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), no election to use shares for the payment
of withholding taxes shall be effective unless made in compliance with any
applicable requirements of Rule 16b-3 or any successor rule under the Exchange
Act.
(c) If the recipient of an Award under the Plan elects, in accordance with
Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), to
recognize ordinary income in the year of acquisition of any shares awarded under
the Plan, the Company will require at the time of such election an additional
payment for withholding tax purposes based on the difference, if any, between
the purchase price of such shares and the fair market value of such shares as of
the date immediately preceding the date of the Award.
-8-
<PAGE> 22
13. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors and approved by the Company's shareholders.
(b) Termination. Unless sooner terminated by the Board of Directors or
shareholders of the Company, the Plan shall terminate upon the earlier of (i)
the close of business on the day next preceding the tenth anniversary on the
date of its adoption by the Board of Directors, or (ii) the date on which all
shares available for issuance under the Plan shall have been issued pursuant to
the final vesting of Awards granted under the Plan. If the date of termination
is determined under (i) above, then Awards outstanding on such date shall
continue to have force and effect in accordance with the provisions of the
instruments evidencing such Awards.
14. CHANGE IN CONTROL.
(a) Notwithstanding any provision to the contrary in this Plan, and except
as provided in clause (b)(ii) below, if, following a Change in Control (as
defined below) of the Company an employee is relocated more than 100 miles from
Boston or is terminated for any reason, all of the Company's rights to
repurchase outstanding shares issued to such employee in the Plan prior to the
occurrence of such Change in Control shall cease and terminate as of the date
such Change in Control occurs; and such shares, from and after such date, shall
no longer be restricted by the provisions of Section 5 of the Plan.
(b) (i) A "Change in Control" shall occur or be deemed to have occurred
only if any of the following events occur: (x) any merger or consolidation with
another corporation unless such merger or consolidation does not change in any
material way the voting control of the Company; (y) any sale of all or
substantially all of the assets and business of the Company; or (z) any
acquisition of more than 25% of the outstanding voting securities of the Company
(the "Shares") by any person, entity or "group" (as defined in Section 13(d)(3)
of the Exchange Act), PROVIDED, HOWEVER, that this clause (i) of this Section
14(b) shall not apply to any acquisition of shares by John F. Cogan, Jr., who is
currently the beneficial owner of approximately 15% of the Shares.
(ii) The provisions of subsection (a) to this Section 14 shall not apply to
any employee who is terminated following any Change in Control pursuant to
clause (z) of Section 14(b)(i) if such employee has or is a member of the group
which has acquired more than 25% of the Shares.
-9-
<PAGE> 23
15. PROVISIONS FOR FOREIGN PARTICIPANTS.
The Board of Directors may, without amending the Plan, modify Awards
granted to participants who are foreign nationals or employed outside the United
States to recognize differences in tax, securities, currency laws, rules,
regulations or customs of such foreign jurisdictions.
Adopted by the Board of Directors on
January 26, 1995
-10-
<PAGE> 1
Exhibit 10.55
CREDIT AGREEMENT
between
Teberebie Goldfields Limited
and
Skandinaviska Enskilda Banken AB (publ)
<PAGE> 2
<TABLE>
INDEX
<CAPTION>
Clause Page
- ------ ----
<S> <C>
1. Definitions 1
2. Advances; loan account 3
3. Conditions precedent 4
4. Representations and warranties 5
5. Covenants 7
6. Repayment; prepayment 8
7. Interest 8
8. Payments 9
9. Fees, EKN-premium and other costs 10
10. Events of default 11
11. Waiver 13
12. Notices 13
13. Assignment 13
14. Governing law; jurisdiction 13
15. Miscellaneous 15
ADDENDUM 16
EXHIBIT Opinion of the Borrower's legal adviser 17
</TABLE>
<PAGE> 3
1
THIS CREDIT AGREEMENT (the "Agreement") is made BETWEEN
(1) Teberebie Goldfields Limited, P.O. Box 6, Tarkwa, Republic of Ghana, (the
"Borrower"), Satellite Telex No. 0581 4962000 GOLD and telefax No. 233-362
273); and
(2) Skandinaviska Enskilda Banken AB (publ), Enskilda, S-205 20 Malmo, Sweden,
(the "Lender"), (Telex No. 16400 essebm s and telefax No. +46 - 40 124785
to Export & Project Finance, Malmo and telex No. 11000 essebi s and telefax
No. +46 - 8 6110384 to Foreign Credits Administration, Stockholm).
WHEREAS the Borrower has concluded a contract No. TGL-X5-0002 dated 27 February,
1996 (the "Contract") with Svedala-Arbra AB, Svedala, Sweden (the "Exporter")
concerning delivery from the Exporter to the Borrower of primary crashing
section with stockpile, belt conveyors and screening units;
WHEREAS the total mount of the Contract is SEK 135,000,000.-;
WHEREAS the Lender is prepared to place at the disposal of the Borrower a credit
facility in USD (as defined below) to finance 70% of the amount of the Contract;
NOW IT IS HEREBY AGREED by and between the parties hereto as follows:
1. DEFINITIONS
-----------
1.01 In this Agreement
"Advance" means the countervalue in USD of each principal
amount disbursed hereunder (collectively the "Advances").
"Banking Day" means a day on which commercial banks are open for domestic
and foreign exchange business in the place specified or, if no place is
specified, in Stockholm and New York City.
<PAGE> 4
2
"Commitment" means the obligation of the Lender to make disbursements to
the Exporter hereunder up to the aggregate principal amount of SEK
94,500,000.-, subject to and in accordance with the terms hereof.
"Commitment Period" means the period from the date of this Agreement up to
and including August 31, 1996.
"EKN" means Exportkreditnamnden, (the Swedish Export Credits Guarantee
Board), Box 3064, S-103 61 Stockholm, Sweden.
"Event of Default" means any of the events specified in Clause 10.
"Exportkredit" means AB Svensk Exportkredit, Box 16368, S-103 27 Stockholm,
Sweden.
"External Indebtedness" means any present or future indebtedness
denominated or payable or optionally payable in a currency other than the
legal currency of the Republic of Ghana or which is owed to any person,
firm, organization or company not resident in the Republic of Ghana.
"Interest Payment Date" means the last day of an Interest Period.
"Interest Period" means each period (commencing on the date of the making
of an Advance and thereafter forthwith upon expiry of the preceding
Interest Period) of six months for calculation of interest provided that
(a) the first Interest Period of each Advance made after the first Advance
shall be adjusted so as to be coterminous with the current Interest
Period of the first Advance, unless such Advance is made less than 30
days prior to the end of the current Interest Period, in which case
the Interest Period for such Advance shall be extended to end on the
last day of the next following Interest Period;
(b) if the last day of an Interest Period should not be a Banking Day such
Interest Period shall end on the next following Banking Day unless
such Banking Day falls in the next calendar month in which event the
Interest Period shall end on the immediately preceding Banking Day;
<PAGE> 5
3
(c) the Interest Period in which the first repayment date falls shall be
shortened so as to end on such first repayment date.
"Loan" means the aggregate principal amount from time to time outstanding
hereunder.
"Spread" means 0.5% per annum.
"Swedish Kronor" or "SEK" means the lawful currency of Sweden.
"US Dollars" or "USD" means the lawful currency of the United States of
America.
2. DISBURSEMENTS; ADVANCES; LOAN ACCOUNT
-------------------------------------
2.01 Disbursements up to, but not exceeding, the Commitment shall be made,
subject to the terms of this Agreement, during the Commitment Period on a
Banking Day direct to the Exporter within fifteen Stockholm Banking Days
after the Exporter's presentation to the Lender of the relevant documents
as stipulated in the addendum to this Agreement.
2.02 Each Advance shall amount to the USD equivalent of the amount in SEK which
is to be disbursed hereunder to the Exporter in accordance with the terms
of payment in clause 2.01 above. Such USD equivalent shall be calculated at
the buying rate for USD against SEK prevailing between banks in Stockholm
at or about 11.00 a.m. on the second Stockholm Banking Day prior to the
relative date of the Advance.
2.03 The Lender shall open and maintain a loan account in accordance with its
usual practices in the name of the Borrower and shall debit to the loan
account the amount of each Advance hereunder and interest and other charges
accrued in respect thereof from time to time and shall credit to the loan
account the amount of each payment by the Borrower of principal of and
interest on the Loan and other charges in respect thereof. The loan account
maintained by the Lender, shall, in the absence of manifest error,
constitute conclusive evidence of the indebtedness of the Borrower to the
Lender hereunder and of the amounts from time to time due from the Borrower
under this Agreement. Updated and mended versions of the loan
<PAGE> 6
4
account will be provided to the Borrower within a reasonable time after it
is amended or updated.
3. CONDITIONS PRECEDENT
--------------------
3.01 The obligations of the Lender hereunder are subject to the condition that
the Lender shall have received all of the following in the form and
substance satisfactory to the Lender
(a) a copy of a resolution of the Board of Directors of the Borrower,
certified by an officer of the Borrower, approving this Agreement and
authorizing appropriate signatories to execute this Agreement;
(b) the names and authenticated specimen signatures of the officers of the
Borrower referred to in sub-clause (a) above;
(c) an opinion of the Borrower's legal adviser, approved by the Lender,
and substantially in the form set out in the Exhibit;
(d) a commitment from Exportkredit to refinance or (at the option of the
Lender) to take an assignment of the Advances at a rate of interest
and on conditions acceptable to the Lender;
(e) a guarantee from EKN in favour of the Lender and, prior to the making
of each Advance, evidence satisfactory to the Lender that such
guarantee shall extend to the Advance to be made;
(f) confirmation from the Exporter that the Contract is in full force and
effect and that the Exporter has received the payments prescribed in
the Contract not be be financed under this Agreement and complying
with the requirements of EKN; and
(g) all amounts due pursuant to Clause 9 below.
3.02 The obligations of the Lender hereunder with respect to the making of each
Advance are subject to the further conditions precedent that at the time
for the making of an Advance the matters represented by the Borrower set
out in Clause 4.01 shall be true and accurate on and as of such times as if
made at each such time and no Event of Default or event
<PAGE> 7
5
which, with a giving of notice, lapse of time or other condition would be
an Event of Default shall have occurred and be continuing or would result
from such Advance.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
4.01 The Borrower represents and warrants to the Lender that:
(a) the Borrower is duly organized and validly existing as a corporation
under the laws of the Republic of Ghana and has all requisite
corporate power and authority to own its properties and to carry on
its business as it is now being conducted;
(b) the Borrower has all requisite corporate power and authority to enter
into and perform this Agreement and has taken all necessary action to
authorize its borrowings under this Agreement and to authorize the
execution, delivery and performance of this Agreement;
(c) this Agreement constitutes and will constitute valid and legally
binding obligations of the Borrower enforceable in accordance with its
terms, subject as to enforcement of remedies to applicable bank-
ruptcy, insolvency, reorganization and similar laws affecting the
enforcement of the rights of contracting parties and subject to a
court's discretionary authority with respect to the granting of a de-
cree ordering specific performance or other equitable remedies, and
would be so treated in the courts of the Republic of Ghana and this
Agreement is in proper form for its enforcement in such courts;
(d) the execution, delivery and performance of this Agreement do not
violate any provision of any law, regulation, decree, order, or
permit, the constitutional documents of the Borrower or any
contractual or other provision now existing and binding on the
Borrower or on any of its properties and, except as contemplated in or
in connection with this Agreement, will not result in the creation or
imposition of any charge or any other encumbrance whatsoever on any of
its assets;
<PAGE> 8
6
(e) the Borrower has duly obtained all approvals, consents and
authorizations of, and has duly effected any declarations, filings or
registrations with any governmental or other authority in the Republic
of Ghana which are required or appropriate in connection with the
execution, delivery and performance of this Agreement and such
approvals, consents and authorizations are in full force and effect;
(f) the latest accounts of the Borrower as at December 31, 1994, a copy of
which has been sent to the Lender, were prepared in accordance with
generally accepted and consistently applied accounting principles and
practices in the Republic of Ghana and present fairly in all material
respects the result of the operations of the Borrower for the year
ended on the date to which such accounts were prepared and the
financial position of the Borrower as at such date and there has been
no material adverse change in the business, assets or condition of the
Borrower since that date;
(g) the obligations of the Borrower hereunder constitute and will except
as otherwise provided by law, including, without limitation, laws
relating to bankruptcy and fraudulent conveyances, constitute
unconditional general obligations of the Borrower ranking at least
pari passu with all other unsecured general obligations of the
Borrower;
(h) to the best knowledge and belief of the Borrower the Borrower is not
in breach of or in default under any agreement to which it is a party
or which is binding on it or any of its assets to an extent or in a
manner which might have a material adverse effect on its business or
financial condition;
(i) to the best knowledge and belief of the Borrower no action or
administrative proceeding of or before any court or agency which might
have a material adverse effect on the business or financial condition
of the Borrower has been started or threatened; and
(j) the Borrower is subject to civil and commercial law with respect to
its obligations under this Agreement, and the borrowings by the
Borrower hereunder and the execution, delivery and performance
<PAGE> 9
7
of this Agreement by the Borrower constitute private and commercial
acts. Neither the Borrower nor any of its property enjoys any rights
of immunity from the jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to
judgement, attachment in aid of execution, execution or otherwise)
with respect to itself or its property or with respect to its
obligations under this Agreement.
5. COVENANTS
---------
5.01 The Borrower hereby undertakes and agrees that during the term of this
agreement and as long as any amount is outstanding hereunder the Borrower
(a) will provide the Lender with a copy of its annual report and audited
accounts as soon as available and in any event within 180 days of the
end of each accounting year, together with such other information as
the Lender may reasonably request from time to time;
(b) will promptly obtain and maintain in effect from time to time such
registrations, licenses, consents and approvals as may be required in
respect of this Agreement under applicable laws or regulations to
enable the Borrower to perform its obligations and/or to permit the
Lender to enforce its rights hereunder and will promptly furnish the
Lender with copies thereof upon request;
(c) will not enter into any transaction of merger or consolidation or
sell, transfer, lease or otherwise dispose of all or any substantial
portion of its present or future assets or revenues as to adversely
affect the Borrower's ability to perform its obligations under this
Agreement;
(d) will except as otherwise provided by law including, without
limitation, laws relating to bankruptcy and fraudulent conveyances,
ensure at all times that its obligations hereunder constitute
unconditional general obligations of the Borrower ranking at least
pail passu with all other unsecured obligations of the Borrower now or
hereafter outstanding;
<PAGE> 10
8
(e) will promptly notify the Lender in writing of any Event of Default or
event which with the giving of notice, lapse of time or other
condition would constitute an Event of Default forthwith upon the
occurrence thereof; and
(f) will, within 90 days after the execution of this Agreement, grant the
Lender a first mortgage on any and all equipment to be supplied by the
Exporter to the Borrower pursuant to the Contract. Any such mortgage
to be provided pursuant to this clause (f) shall be substantially in
the form used by the Borrower to grant mortgage to secured parties
with respect to its other assets.
6. REPAYMENT; PREPAYMENT
---------------------
6.01 The Borrower shall repay the Loan in USD by ten (10) semi-annual
consecutive instalments each in the amount corresponding to one tenth
(1/10) of the Commitment. The first instalment shall fall due on the
earlier of (i) the date falling six months after the commissioning of the
equipment and (ii) July 31, 1997.
6.02 The Borrower may at any time prepay the Loan in whole or in part, provided
the Borrower undertakes to pay any additional costs or any claims for
penalty fees which Exportkredit might charge in accordance with the
regulations prevailing from time to time of the Swedish export credit
system.
6.03 Amounts prepaid shall not be available for reborrowing hereunder.
7. INTEREST
--------
7.01 The Borrower shall pay interest on the Loan for the whole period thereof at
the fixed rate of 6.42% per annum (which is the rate fixed by
Export-kredit plus the Spread). Interest on the Loan shall be paid in
arrears on each Interest Payment Date.
7.02 In the event that the Borrower should fail to pay on the due date any
principal or interest or any other amount due hereunder, the Borrower shall
pay interest on such principal, interest and any such other amount from the
due date up to and including the day when the amount is actually paid
calculated at an annual rate as the higher of (i) 1% per annum above the
inte-
<PAGE> 11
9
rest rate at which Exportkredit fund themselves on the market and (ii) 1%
per annum above the rate of interest established in Clause 7.01. Such
interest shall be compounded semi-annually and payable on demand.
8. PAYMENTS
--------
8.01 All payments due to the Lender shall be made under telex advice by the
Borrower in same day funds settled through the New York Clearing House
Interbank Payments System or in such other US Dollars funds as may at the
relevant time be customary for the settlement of international banking
transactions of the type contemplated by this Agreement. Payments shall be
made on the dates prescribed - not later than 10:00 a.m. New York City time
- in New York City to the Lender's account No. 10.00015 with Skandinaviska
Enskilda Banken AB, New York Branch, 245 Park Avenue, New York, N.Y. 10167
or to such other bank as shall be notified to the Borrower by the Lender.
8.02 All payments to be made by the Borrower hereunder shall be made without any
set-off or counterclaim whatsoever. If at any time any law of the Republic
of Ghana or of any other jurisdiction to which the Borrower may be subject
or through or from which the Borrower may make payment hereunder requires
the Borrower to make any deduction or withholding of whatsoever nature from
any payment due under this Agreement or if any tax or duty of any kind is
payable in the Republic of Ghana or in any other jurisdiction as aforesaid
by the Lender in respect of sums paid by the Borrower under this Agreement,
the sum due from the Borrower in respect of such payment shall be increased
to the extent necessary to ensure that after the making of such deduction
or withholding or after the discharge of the tax or duty payable by the
Lender, the Lender receives a net sum equal to the sum which it would have
received had no such deduction or withholding been made or had no such tax
or duty been payable. The Borrower shall promptly deliver to the Lender any
receipts, certificates or other proof evidencing the amounts, if any, paid
in respect of any deduction or withholding as aforesaid and any
certificates or other receipts in respect of the payment of any tax or
duty.
8.03 The liability of the Borrower to discharge any amount due under this
Agreement is unconditional and in no respect dependent on the fulfilment by
the Exporter, or by any party cooperating with the Exporter in respect
<PAGE> 12
10
of deliveries to the Borrower for the project herein referred to, of its
obligations under the Contract, or any related contract, respectively, and
will not be affected in any way by reason of any claim which the Borrower
might have or might consider that it has against the Exporter or any such
cooperating party, or by any other reason whatsoever.
8.04 All interest and other payments hereunder of an annual nature shall accrue
from day to day and be calculated on the actual number of days elapsed and
on the basis of a 360 day year.
8.05 All payments falling due on a non-Banking Day shall be made on the next
following Banking Day unless such Banking Day falls in the next calendar
month in which event such payment shall be made on the immediately
preceding Banking Day and interest shall be calculated up to and including
and be due for payment on the actual day of payment.
8.06 Any amount paid by the Borrower hereunder shall be applied by the Lender,
at its discretion, towards amounts due and unpaid of whatever kind owed by
the Borrower under this Agreement.
9. FEES, EKN-PREMIUM AND OTHER COSTS
---------------------------------
9.01 The Borrower shall pay to the Lender, for account Exportkredit, a
commitment fee in SEK at the rate of 0.25% per annum on the daily
unutilized portion of the Commitment. The fee shall be calculated from the
date of signing of this Agreement and shall be paid in arrears on June 30
and December 30 each year and on the date of the last Advance.
9.02 The Borrower shall pay to the Lender a management fee in SEK at the rate of
0.35% flat calculated on the Commitment, the fee being payable on the date
of the signing of this Agreement.
9.03 The Borrower shall pay to the Lender an administration fee in USD at the
rate of 0.20% per annum calculated on the Loan and payable semi-annually
on each Interest Payment Date.
9.04 The premium charged by EKN for the export credit guarantee shall be paid by
the Borrower in USD on the date to be specified by the Lender.
<PAGE> 13
11
9.05 The Borrower shall pay to the Lender on demand the Lender's reasonable
costs and expenses, including reasonable legal fees, in connection with
the enforcement of, or the preservation of any fight under, this
Agreement.
9.06 The Borrower shall pay any stamp duty or similar taxes or charges in the
Republic of Ghana to which this Agreement may be subject.
9.07 In case the Commitment is not, or not fully, utilized, the Borrower shall
pay any costs which Exportkredit might charge in accordance with the
regulations prevailing from time to time of the Swedish export credit
system.
10. EVENTS OF DEFAULT
-----------------
10.01 The Lender may, by notice to the Borrower, (i) declare that the unutilized
portion of the Commitment shall be cancelled forthwith and/or (ii) declare
the Loan due and payable either immediately or on the expiration of such
period as may be specified in such notice whereupon the same shall become
due and payable together with all interest accrued thereon and all other
amounts payable hereunder, if anyone of the following events ("An Event of
Default") shall occur and be continuing at the expiration of either the
10-day period following notice thereof to the Borrower or the period
specified below, if any, which ever is greater:
(a) the Borrower fails to pay on the due date any principal of or inter-
est on the Loan or any other amount due under this Agreement; or
(b) any representation or warranty of the Borrower herein or in any
certificate or other document furnished pursuant hereto proves to be
or becomes at any time incorrect in any material respect; or
(c) the Borrower defaults in the performance of any other provision of
this Agreement and such default is, in the reasonable and good faith
opinion of the Lender, incapable of remedy or, if capable of remedy,
continues unremedied for 30 days after notice thereof has been given
to the Borrower by the Lender; or
(d) any present or future material indebtedness of the Borrower, other
than under this Agreement, is not paid when due and payable or is
<PAGE> 14
12
capable of being declared or has been declared prematurely due and
payable or the security for any such indebtedness becomes
enforceable, provided that any such default jeopardizes or may
jeopardize the ability of the Borrower to perform or observe any of
its obligations hereunder; or
(e) the Borrower defaults in any guarantee obligation or the security for
any such guarantee obligation becomes enforceable; or
(f) any governmental licence, authorization, consent, approval or
registration necessary to enable the Borrower to comply with its
obligations hereunder and/or to permit the Lender to enforce its'
rights hereunder is revoked, withdrawn, modified or withheld or shall
otherwise fail to remain in full force and effect; or
(g) the Borrower is adjudicated or found bankrupt or insolvent or enters
into any composition or other arrangement with its creditors
generally or stops payment of all or part of its indebtedness or
admits in writing its inability to pay its debts as they fall due; or
(h) the Borrower ceases, or threatens to cease, to carry on its business
or disposes, or threatens to dispose, of a substantial part of its
business, properties or assets or the same are seized or
appropriated, provided that any such action jeopardizes or may
jeopardize the ability of the Borrower to perform or observe any of
its obligations hereunder; or
(i) any other event occurs which in the reasonable and good faith opinion
of the Lender jeopardizes or may jeopardize the ability of the
Borrower to perform or observe any of its obligations hereunder.
10.02 The Borrower shall indemnify the Lender against any reasonable expenses
which the Lender may sustain or incur as a consequence of any default by
the Borrower in payment of any amount payable hereunder.
<PAGE> 15
13
11. WAIVER
------
11.01 No failure to exercise and no delay in exercising, on the part of the
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof, or the exercise
of any other power or right. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
12. NOTICES
-------
12.01 All notices, requests and demands to or upon the parties hereto shall be
given or made by telex, telefax or letter. All such notices, requests and
demands to or upon the Borrower and/or the Lender shall be deemed to have
been duly given or made when dispatched by a telex message addressed to
the telex number set forth in the preamble above or as may subsequently be
specified in a written notice to the Borrower and the Lender,
respectively, and in the case of communication by telefax or letter, when
received.
13. ASSIGNMENT
----------
13.01 The Borrower may not assign or transfer its rights or obligations under
this Agreement without the prior written consent of the Lender.
13.02 The Lender may at any time assign or transfer its rights or obligations
under this Agreement to Exportkredit, EKN and/or the Exporter upon
notification by telex to the Borrower. After such assignment or transfer
to Exportkredit the Lender shall, unless otherwise notified to the
Borrower, in all respects represent Exportkredit vis-a-vis the Borrower
with respect to this Agreement.
13.03 The Lender may disclose to Exportkredit and/or EKN and/or the Exporter
such information about the Borrower and this Agreement as the Lender shall
consider appropriate.
14. GOVERNING LAW; JURISDICTION
---------------------------
14.01 This Agreement shall be governed by and construed in accordance with
Swedish law.
<PAGE> 16
14
14.02 The Borrower hereby irrevocably waives any immunity relating to either
jurisdiction or execution on the grounds of sovereignty or otherwise to
which it or its properly may be subject.
14.03 Any dispute which may arise between the Borrower and the Lender in
connection with this Agreement shall in the first instance be settled by
mutual discussions. Should an agreement not be reached within 30 days, the
dispute shall be settled under the Rules of Conciliation and Arbitration
of the International Chamber of Commerce by one or more arbitrators
appointed in accordance with the said Rules.
The place of arbitration shall be Zurich. The court of arbitration shall
apply Swedish law.
The decision of the arbitration is final and obligatory for the parties
without right of a further appeal or contestation of its fulfillment. The
enforcement of such decision may be made through any competent court.
No divergence of opinion or dispute arising between the parties hereto can
suspend the Borrower's undertaking to pay at their maturities and in the
specified currency, all amounts due in connection with the present
Agreement.
Notwithstanding the foregoing the Lender reserves the right to commence
proceedings in any competent court or appropriate authority in Sweden or
in the Republic of Ghana or in any country having or claiming jurisdiction
in respect of this Agreement, to recover any amount due hereunder from the
Borrower in default hereunder with respect to such amount. The Lender may
claim execution of any judgement or order in any court or appropriate
authority within the Republic of Ghana or of any other country where the
Borrower has any assets.
The Borrower hereby agrees that any writ or notice of any legal process in
connection with any action or proceeding brought in a Swedish court may be
served on it by leaving a copy with the Consul General of the Republic of
Ghana in Stockholm.
<PAGE> 17
15
15. MISCELLANEOUS
-------------
15.01 Each document to be delivered pursuant to this Agreement shall be in the
English language and all notices shall be in the English language.
This Agreement has been executed in two copies, of which the Borrower and the
Lender have taken one each.
Tarkwa, 5 March, 1996
Teberebie Goldfields Limited
By: /s/ Lucien Girard
Malmo, 11 March, 1996
Skandinaviska Enskilda Banken AB (publ)
By: /s/
<PAGE> 18
16
ADDENDUM
Addendum to the Credit Agreement between Teberebie Goldfields Limited, Tarkwa
(Republic of Ghana) and Skandinaviska Enskilda Banken AB (publ), Malmo (Sweden)
dated 5/11 March, 1996
Documents to be presented by the Exporter to the Lender in order to receive
disbursements according to Clause 2.01 of the Credit Agreement:
70 (seventy) percent of the total Contract amount to be paid pro rata against
presentation of:
Originals of each of the following documents with respect to the equipment sold
pursuant to the Contract:
- - Carrier's Receipt or Ocean Bill of Lading;
- - Ghana Special Customs Invoice (Form C61);
- - Vendor Commercial Invoice;
- - Vendor Packing List;
- - Clean Report of Findings from authorized inspection agency;
- - Original Bank Guarantee (retention bond) each coveting pro rata 10% of the
contract amount; and
- - Confirmation Letter from the Exporter stating that the
relevant retention bond has been duly executed in accordance
with the conditions of the Contract.
The documents shall appear on their face to be correct. It is understood that
the Lender does not undertake to examine the documents according to the ICC
uniform customs and practice for documentary credits and does not assume any
responsibility for the validity and enforceability of the documents.
Tarkwa, 5 March, 1996
Teberebie Goldfields Limited
By: /s/ Lucien Girard
Malmo, 11 March, 1996
Skandinaviska Enskilda Banken AB (publ)
By: /s/
<PAGE> 19
17
EXHIBIT
(Letterhead of the Borrower's legal adviser)
Skandinaviska Enskilda Banken AB (publ)
Enskilda
S-205 20 MALMO Sweden
(Place and date of issue)
Dear Sirs,
I have acted as counsel for Teberebie Goldfields Ltd., Tarkwa, Republic of Ghana
(the "Borrower") in connection with the Credit Agreement (the "Agreement")
concluded on , 1996, between the Borrower and Skandinaviska Enskilda
Banken AB (publ) (the "Lender") under which the Lender has agreed to make
available a credit facility to the Borrower of the countervalue in US Dollars
of Swedish Kronor 94,500,000.
I have examined and am familiar with:
(a) the Agreement;
(b) the laws and regulations governing the organization, powers and functions
of the Borrower;
(c) the special legislation, decrees, resolutions and other legal instruments
authorizing the Borrower to execute and deliver the Agreement;
(d) such other documents, corporate records, certificates and instruments as in
my judgement are necessary or appropriate to enable me to render the
opinion expressed herein.
<PAGE> 20
18
I have assumed due compliance with all matters of Swedish law, by which law the
Agreement is expressed to be governed. On the basis of the foregoing I am of the
opinion that:
1. The Borrower is duly organized and validly existing as a corporation under
the laws of the Republic of Ghana and has all requisite corporate power and
authority to own its properties and to carry on its business as it is now
being conducted.
2. The Borrower has all requisite corporate power and authority to enter into
and perform the Agreement and has taken all necessary action to authorize
its borrowings under the Agreement and to authorize the execution, delivery
and performance of the Agreement.
3. The Agreement constitutes and will constitute valid and legally binding
obligations of the Borrower enforceable in accordance with its terms,
subject as to enforcement of remedies to applicable bankruptcy, insol-
vency, reorganization and similar laws affecting the enforcement of the
rights of contracting parties and subject to a court's discretionary
authority with respect to the granting of a decree ordering specific
performance or other equitable remedies, and would be so treated in the
courts of the Republic of Ghana and the Agreement is in proper form for
its enforcement in such courts.
4. The execution, delivery and performance of the Agreement do not violate any
provision of any law, regulation, decree, order, or permit, the
constitutional documents of the Borrower or any contractual or other
provision now existing and binding on the Borrower or on any of its
properties and, except as contemplated in or in connection with the
Agreement, will not result in the creation or imposition of any charge or
any other encumbrance whatsoever on any of its assets.
5. The Borrower has duly obtained all approvals, consents and authorizations
of, and has duly effected any declarations, filings or registrations with
any governmental or other authority in the Republic of Ghana which are
required or appropriate in connection with the execution, delivery and
performance of the Agreement and such approvals, consents and
authorizations are in full force and effect. Except for registration of the
Agreement
<PAGE> 21
19
and the security document referred to in article 5.01 (f) of the Agreement
with the Bank of Ghana and with the Registrar of Companies of the Republic
of Ghana, it is not necessary or advisable to further file, register or
record the Agreement or any other instrument relating thereto in any public
office or elsewhere in the Republic of Ghana.
6. The obligations of the Borrower under the Agreement constitute and will,
except as otherwise provided by law, including, without limitation, laws
relating to bankruptcy and fraudulent conveyances, constitute unconditional
general obligations of the Borrower ranking at least pad passu with all
unsecured general obligations of the Borrower.
7. The Borrower is not in breach of or in default under any agreement to which
it is a party or which is binding on it or any of its assets to an extent
or in a manner which might have a material adverse effect on its business
or financial condition.
8. No action or administrative proceeding of or before any court or agency
which might have a material adverse effect on the business or financial
condition of the Borrower has been started or threatened.
9. The Borrower is subject to civil and commercial law with respect to its
obligations under the Agreement, and the borrowings by the Borrower
thereunder and the execution, delivery and performance of the Agreement by
the Borrower constitute private and commercial acts. Neither the Borrower
nor any of its property enjoys any rights of immunity from the jurisdiction
of any court or from any legal process (whether through service of notice,
attachment prior to judgement, attachment in aid of execution, execution
or otherwise) with respect to itself or its property or with respect to
its obligations under the Agreement.
10. Mr. Lucien Girard, Managing Director of the Borrower, who has signed the
Agreement, has sole the right, power and authority to execute and deliver
the Agreement on behalf of the Borrower.
11. The engagement made by the Borrower in articles 8.02, 9.05 and 9.06 of the
Agreement to fully compensate the Lender for any deductions or with-
holdings in the Republic of Ghana and to pay any stamp duty or similar
<PAGE> 22
20
taxes or charges in the Republic of Ghana to which the Agreement may be
subject, is valid and binding on the Borrower.
12. Under the laws of the Republic of Ghana the choice of Swedish law to govern
the Agreement is a valid choice of law and there is no requirement for such
validity that the Agreement should be executed outside the Republic of
Ghana. The submission by the Borrower to the jurisdiction of the Swedish
courts is valid and binding upon the Borrower.
Yours faithfully,
<PAGE> 1
Exhibit 11
THE PIONEER GROUP, INC.
Computation of Earnings Per Share
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Computation for Consolidated
Statement of Income Year Ended December 31.
-----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net income (1) $ 22,811 $ 33,460 $ 18,130
Shares
Weighted average number of
common shares outstanding (2) 24,806,000 24,666,000 24,545,000
Dilutive effect of stock options and
restricted stock proceeds as common
stock equivalents computed under the
treasury stock method using the
average price during the period (2) 505,000 688,000 431,000
Weighted average number of shares
outstanding as adjusted (1) (2) 25,311,000 25,354,000 24,976,000
Earnings per share (1) (2) $ 0.90 $ 1.32 $ 0.72
<FN>
(1) These amounts agree with the related amounts in the Consolidated Statement
of Income.
(2) Adjusted for December 1, 1994 and September 1, 1993, 2-for-1 stock splits
effected in the form of 100% stock dividends.
</TABLE>
<PAGE> 1
Exhibit 13
The Pioneer Group, Inc.
1995 Annual Report
<PAGE> 2
The Company will file an Annual Report on Form 10-K with the Securities and
Exchange Commission for the year ended December 31, 1995. A copy of that Report
will be available, free of charge to stockholders of the Company, upon request
to William H. Keough, Senior Vice President and Chief Financial Officer, 60
State Street, Boston, MA 02109.
The Company
The Pioneer Group, Inc., and its subsidiaries (collectively, the "Company"), are
engaged in financial services businesses in both the United States and in many
foreign countries and in a number of natural resource development projects in
locales as diverse as the Republic of Ghana and the Russian Far East.
In the United States, the Company conducts four lines of financial services
businesses: (i) investment manager to the U.S. registered investment companies
comprising the Pioneer Family of Mutual Funds, and institutional accounts, (ii)
distributor of shares of the Pioneer Family of Mutual Funds, (iii) venture
capital investor and manager, and (iv) shareholder servicing agent for the
Pioneer Family of Mutual Funds.
The Company's international financial services businesses include investment
operations in: (i) Warsaw, Poland, where the Company manages and distributes
units of three mutual funds, owns 50% of a unitholder servicing agent and
manages an institutional venture capital fund, (ii) Dublin, Ireland, where the
Company distributes shares of, manages and services three offshore investment
funds, sold primarily in Western Europe, and (iii) Moscow, Russia, where the
Company provides financial services, including investment advisory, investment
banking and brokerage services, and where the Company owns 51% of the First
Voucher Fund, the largest Russian voucher investment fund. In addition, the
Company has investment operations in the Czech Republic and has invested in
investment management operations in India and Taiwan.
The Company's subsidiary, Pioneer Goldfields Limited ("PGL"), conducts mining
and exploration activities in the Republic of Ghana and exploration activities
elsewhere in Africa. PGL's principal asset is its ownership of 90% of the
outstanding shares of Teberebie Goldfields Limited, which operates a gold mine
in the western region of the Republic of Ghana. The Company also participates in
several natural resource development ventures in Russia, including a project
pursuing the development of timber production in the Russian Far East, in which
the Company has a 71% direct interest and a 3% indirect interest.
Wholly and Majority-Owned Subsidiaries
Pioneering Management Corporation, Pioneer Funds Distributor, Inc., Pioneering
Services Corporation, Pioneer Capital Corporation, Pioneer SBIC Corp., Pioneer
Associates, Inc., Pioneer Fonds Marketing GmbH, Pioneer International
Corporation, Pioneer First Polish Trust Fund Joint Stock Company S.A., Pioneer
Investment Poland Ltd., Pioneer Management (Ireland) Limited, Pioneer Omega,
Inc., Pioneer First Russia, Inc., First Voucher Fund, First Voucher Bank,
Pioneer Securities, Pioneer Services, Joint Stock Company Management Company
(KUIF), Joint Stock Company Pioneer Investments, Pioneer Czech Investment
Company, A.S., Pioneer Goldfields Holdings, Inc., Pioneer Goldfields Limited,
Teberebie Goldfields Limited, Pioneer Forest, Inc., Joint Stock Company Forest
Starma, Joint Stock Company Amgun Forest, Joint Stock Company Udinskoye, Joint
Stock Company Pioneer Starma Equipment, Pioneer Metals and Technology, Inc.,
Joint Stock Company Pioneer Metals International, PioGlobal Corporation,
Pioneer Real Estate Advisors, Inc., Pioneer Investments Corporation.
Joint Ventures
Financial Services Limited, ITI Pioneer AMC Ltd., Core Pacific Securities
Investment Trust Co., Ltd., International Joint Stock Company Starma Holding,
and Joint Stock Company Tas-Yurjah Mining Company.
<PAGE> 3
[Photo--John F. Cogan, Jr. seated in chair]
"It was a year of contrasts and, from a financial perspective, markedly
different from 1994. Nevertheless, when all is distilled, Pioneer reached
several major milestones and firmly set the underpinnings for potential profit
growth."
Fellow Stockholders:
In 1995, Pioneer experienced more significant events, not all of them favorable,
than we have witnessed in some time. It was a year of contrasts and, from a
financial perspective, markedly different from 1994. Nevertheless, when all is
distilled, Pioneer reached several major milestones and firmly set the
underpinnings for potential profit growth.
Financial Results
In most respects, our biggest disappointments in 1995 came on the financial
front. As we indicated in last year's report, in 1994 we experienced the great
fortune of two extraordinary and significantly positive events. The combination
of the two -- a favorable one-time, deferred income tax adjustment of 16 cents
per share from our gold mining operations in Ghana and explosive earnings of 31
cents per share from our Polish operations -- swelled 1994 earnings to $1.32 per
share.
In 1995, we did not experience such unexpected blessings. The Polish stock
market declined, negatively affecting assets under management and sales, and we
experienced a 30 cents per share decrease in 1995 earnings from our Polish
investment operations. Also, we took a 12 cents per share negative adjustment
for expenses related to the postponed stock offering of Pioneer Goldfields
Limited ("PGL"). The end result was that 1995 earnings were 90 cents per share.
Importantly, absent these unusual events of 1994 and 1995, earnings would have
held steady.
There also were contrasts in other categories of operating earnings. On the plus
side, worldwide venture capital operations contributed 6 cents per share to
earnings in 1995, and our new investment operations in Russia provided a total
of 6 cents per share. This compares well to 1994, when the worldwide venture
capital operations lost 8 cents per share. Despite increased expenditures for
investment management and other resources, earnings from our domestic mutual
fund business were 35 cents per share, versus 36 cents in 1994. Ongoing
gold-mining earnings were flat in 1995, once one subtracts the 1994 tax
adjustment.
Revenues for 1995 were $198.7 million, up 15.7% from 1994 revenues of $171.7
million.
<PAGE> 4
Financial Services
We witnessed a number of milestones in our investment businesses, especially our
younger operations abroad. In 1995, we launched several new products, including:
- - Our first offshore funds, based in Dublin and designed primarily for European
markets.
- - An institutional venture capital fund in Poland.
- - Our third retail fund in Poland.
- - A mutual fund operation in the Czech Republic.
- - A fourth fund through our joint venture in India, which has become widely
recognized as offering one of India's premier domestic fund families.
The year also brought other new initiatives overseas, including:
- - The acquisition of a 51% interest in the largest Russian voucher fund and
100% of the related management companies.
- - Beginning work on two institutional direct investment funds in Russia and a
Polish real property fund.
On the domestic mutual fund front, we introduced:
- - A new "small-cap" fund in November, our most successful new fund launch ever.
- - Our first variable annuity product.
Sales of U.S. funds during the year were a record $1.8 billion (including
reinvested dividends), an increase of 17% over 1994. Redemptions were $1.1
billion, up 22%. Based on industry estimates available at this writing, it
appears that overall industry sales were flat for 1995, so our sales growth was
significant.
Excluding foreign joint ventures and venture capital pools, assets under
management at year-end 1995 were $13.7 billion, an increase of $2.6 billion over
the prior year-end, despite a decrease in Polish fund assets of $0.3 billion.
On the shareholder service side of the business, our Dublin administration and
processing facility is running smoothly and is working to further integrate
systems with our U.S. and German offices. In the U.S., image processing of
documents is progressing and workflow is now freely transferable electronically
between our Boston and Omaha facilities. We also successfully tested our
disaster recovery sites with simulations held several times during the year.
Natural Resources
Teberebie Goldfields Limited ("TGL"), our 90%-owned gold mining subsidiary in
Ghana, reached a number of significant milestones in 1995. TGL contributed more
than half of our earnings for the third consecutive year. Other noteworthy
events include:
- - Gold shipments reached a record 235,500 ounces, an increase of 34% over 1994.
- - Proven and probable reserves were estimated, based upon independent geological
certification, at 9.1 million ounces, up 36% over the last estimate.
- - A second mine expansion plan was approved, with the objective of raising
overall gold production to at least 400,000 ounces in 1998.
Even with these achievements, it was a difficult year for TGL in several
respects. While the new West plant was constructed and put into production quite
smoothly, and at lower-than-expected cost, the lag in output normally associated
with a new heap leach operation was exacerbated by higher stripping ratios, and
lower-than-anticipated ore grade. More recently, a spate of equipment downtime
compounded these difficulties, as did the challenge of hiring and training
2
<PAGE> 5
new operators and supervisors. At this writing, however, new 136-ton trucks and
a 18-cubic meter hydraulic shovel are at the site, and good progress is being
made in training operators on the new equipment. The effect of these
difficulties was, of course, higher per-ounce production costs. Cash costs per
ounce in 1995 increased to $198 (compared to $161 in 1994) and total costs
increased to $277 (from $248). The average realized price of gold was stable at
$383 per ounce.
While not directly related to gold-mining operations, we were disappointed at
the postponement of our planned offering of approximately 20% of our stock
ownership of PGL, due to unfavorable conditions in the gold and stock markets.
It remains to be seen whether we can move forward with such an offering in 1996.
With respect to our timber harvesting joint ventures in Far Eastern Russia,
there were several positive developments during the year. Forest Starma, in
which the Company currently has a 71% direct interest (increased from 63%) and a
3% indirect interest, commenced shipping timber (acquired in the development
phase) in the third quarter. Together with two other Russian timber ventures, we
now have long-term leases on about 1.26 million acres, with annual aggregate
cutting rights of 760,000 cubic meters. We continue working to improve
productivity at the Siziman project of Forest Starma, and we are cautiously
optimistic that we can develop these ventures effectively.
Summary and Look Ahead
Pioneer traveled a bumpy road in 1995, but we did make progress. We now have a
high number of activities focused on relatively new and quite entrepreneurial
ventures. There is, therefore, quite a bit of simultaneous "start-up" pain, but
we believe the long-term benefits of our ventures will outweigh near-term
stresses. Skeptics abounded when we launched our mutual fund business in Poland.
We expected a lag (not the tremendous spurt we saw in 1994) and in some respects
we still do. Similar skepticism existed about gold-mining when we began our
venture in Ghana. However, we retain our underlying optimism about Poland and
our position as the dominant financial services company. We also fully expect
that TGL will continue to overcome its lag in production from the new processing
plant. In the same vein, we expect to see improved, and in some cases
significant, progress in our other new endeavors.
After much effort, we believe the infrastructure of our domestic mutual fund
business is much improved. We have taken steps to pare unprofitable funds, seek
increases in management fees where appropriate and make the moves necessary to
stimulate our growth. Even though more systems and human resources are still
required, we think we are close to seeing the kinds of results for which we have
been building.
It cannot be expected that every one of our ventures will be a home run. We are
confident, however, that the spikes of 1994 and the bumps of 1995 are but
interim fluctuations in our pattern of long-time growth in earnings and value
for stockholders.
Respectfully submitted,
/s/John F. Cogan, Jr.
- ---------------------
John F. Cogan, Jr
President
March 25, 1996
3
<PAGE> 6
Pioneer: Building on Innovation in 1995
[Photo of World Globes]
Boston, U.S.
Pioneer Small
Company Fund
becomes most
successful mutual
fund launch in
company history.
[Photo]
Dublin, Ireland
Pioneer's first
offshore funds
launched -- Pioneer
Global Equity Fund,
Pioneer Global Bond
Fund, and Pioneer
DM Cashfonds.
[Photo]
4
<PAGE> 7
[Photo of World Globes]
Prague, Czech Republic
Pioneer Czech Investment
Company Trust Fund
launched, joining Pioneer
First Polish Trust Fund
as second Pioneer offer
ing in former Eastern
bloc countries.
[Photo]
Tarkwa, Ghana
Annual production of
Teberebie Goldfields
Limited boosted by
34% to 235,500
ounces; proven and
probable reserves
increased by 36% to
9.1 million ounces.
[Photo]
Moscow, Russia
Major presence in
Russian financial
services established,
including majority
ownership of largest
voucher investment
fund, with 2.1 million
Russian shareowners.
[Photo]
Khabarovsk
Territory, Russia
First commercial
shipment of timber
begins; long-term
timber leases
increased by 1,437%
to 1.26 million acres
(510,100 hectares).
[Photo]
5
<PAGE> 8
Pioneer: 68 Years of Building on Innovation
By definition, a pioneer is an innovator -- one who arrives first on a new
frontier. Since 1928, when we started Pioneer Fund, The Pioneer Group, Inc., has
opened up a number of frontiers in the investment world.
But what makes Pioneer truly unique is the tradition we have established as both
innovators and builders.
As innovators, we identify, launch and nurture promising ventures around the
globe. As builders, we manage money to grow the assets of our clients and
shareowners. We use a patient, long-term perspective that is supported by
in-depth fundamental research and by experience. Over nearly 70 years, these
dual skills have helped us develop strength in several complementary areas:
- - Financial Services
- - Gold
- - Timber
- - Strategic Metals
The Pioneer Group, Inc., has selectively pursued global opportunities in locales
as diverse as India, Poland, Russia and the Czech Republic. In each case we have
applied our particular experience and skills in search for better long-term
returns for our clients and shareowners.
Pioneer provides financial services worldwide through five principal channels:
Products for Individual Investors
[Photo]
Pioneer is committed to helping individual investors build sensible, prudent
portfolios to help achieve life's major financial goals. Today Pioneer offers a
U.S.-based family of funds, and a family of offshore funds for global investors.
These funds invest in carefully selected securities in developed and emerging
markets. Our funds meet clearly defined needs with specific, disciplined
strategies, and a long-term focus, utilizing independent, fundamental research.
A global network of some 1,600 financial organizations, including
broker/dealers, banks, and independent financial planners helps Pioneer
distribute shares of our mutual funds to individuals around the world. And we
provide transaction processing, fund pricing and record keeping for nearly 4
million clients in established markets such as the United States and Germany,
and in emerging markets such as Poland, India and Russia.
Institutional Investment Management
Pioneer's depth of experience as money managers, along with our global
perspective, serves the specific needs of institutional investors around the
world. For more than 20 years, Pioneer has managed assets on behalf of an
institutional clientele that includes corporate and public pension plans,
6
<PAGE> 9
endowments, foundations, insurance companies and religious organizations. These
investors value the strength of our research, and our fresh independent insights
on uncovering value in the world's capital markets.
The Pioneer investment philosophy and disciplined investment process help
provide consistent, attractive returns through different market cycles. These
qualities have made Pioneer particularly successful in difficult areas where
experience, discipline, and access to information are crucial capabilities --
areas as diverse as small companies and emerging markets. Services offered to
institutional investors range from fixed income portfolios to single-country and
direct equity investments.
Real Estate Advisory Services
Pioneer's real estate division was established to advise institutional investors
and corporations on real estate investments in the United States, Poland, India
and Russia. We manage Pioneer Real Estate Shares, a United States mutual fund
that invests in securities of real estate investment trusts (REITs), with Boston
Financial Securities (BFS), a leading real estate company. Pioneer and BFS also
manage the Real Estate Growth Portfolio of the Pioneer Vision variable annuity.
Pioneer's corporate real estate advisory services benefit greatly from our
worldwide presence and experience in both the financial and real estate markets.
And our knowledge base is strengthened from the kind of insights that only come
from maintaining a strong local presence in many regions.
Direct Equity Investing
As experienced money managers and entrepreneurs, Pioneer is adept at evaluating
potential private equity investments. And for new ventures, we can provide the
kind of guidance and support to management that can often make the difference
between success and failure.
In the United States, we focus on small- and mid-size ventures located in
Pioneer's New England home region. Globally, Pioneer offers institutions access
to private equity and real estate markets in Poland, Russia and India.
[Photo]
Pioneer's skill as institutional investment manager in each of these countries
is tied closely to our role in managing ongoing financial service ventures in
the same locations. In establishing each of these businesses, Pioneer has
developed unique local depth of knowledge that benefits from contacts in
government, industry and the investment community.
Emerging Markets Financial Services
Because Pioneer has been distributing its funds in Europe for almost three
decades, we have long recognized the universal appeal of mutual funds.
In recent years, global economic changes have laid the groundwork for an
expansion in the need for financial services. These changes include the rapid
growth of freedom in world capital markets and the increasing popularity of
pension funds. Pioneer
7
<PAGE> 10
began providing investment management to domestic retail mutual funds in Poland
(1992), India (1993), and the Czech Republic (1995).
Pioneer believes that the success we have achieved in our international
financial ventures reflects, in large part, the skill demonstrated by local
Pioneer professionals in adapting our mutual fund philosophy to their
respective markets and cultures.
Pioneer's experience as global money managers, and our wide network of contacts,
have been instrumental in allowing us to uncover, evaluate and develop
high-return natural resource projects. We add value by virtue of technological
improvements, cost efficiencies, and the perspective of global management
committed to long-term success.
Pioneer currently has three natural resource ventures:
Gold
Over the years, Pioneer has analyzed and invested in a variety of global
resource projects on behalf of our clients. That resource enabled us to
undertake our first directly owned natural resource project in 1988, Teberebie
Goldfields Limited in Tarkwa, Ghana. Based on internal assessments of country
risk and the mineral potential in available leaseholds, Pioneer became the first
major Western investor in Ghana in more than 20 years. With Pioneer managing the
process from beginning to end, Teberebie has become a world class gold mine.
One of the keys to development involved Pioneer's strength as an innovator. We
advanced the heap leaching method of gold extraction by applying it to wet
terrain -- a move that improved the economics of mining in the mineral-rich
region, and helps keep costs among the lowest in the industry.
[Photo]
Since Teberebie began commercial production in 1991, output has grown steadily.
In 1995, annual production grew by 34% to 235,000 ounces. In summer 1995,
Pioneer decided to expand again, seeking to increase production to at least
400,000 ounces in 1998.
Along with mine expansion, Pioneer has continued exploratory drilling. At year
end 1995, Pioneer boosted proven and probable reserves by 36% to 9.1 million
ounces.
The financial success of Teberebie only represents part of the equation. Pioneer
is equally proud of the commitment we have made to job training, health care,
and high environmental standards. We believe that contributing to the welfare of
the local community plays an integral role in the long-term success of our
ventures.
8
<PAGE> 11
As a result of our success in Ghana, we are examining a steady stream of
projects in Africa through Pioneer Goldfields Limited, our mineral exploration
and gold mining company (and 90% owner of Teberebie). Pioneer Goldfields focuses
on projects with an attractive blend of manageable risk and high potential
return.
Timber
Pioneer Forest, Inc., was established to hold majority interests in three
companies in the Russian Far East's Khabarovsk Territory: Forest Starma,
Amgun-Forest and Udinskoye, which were formed to develop timber production,
primarily for export to Pacific Rim markets, principally Japan.
The first development, Forest Starma's Siziman project, currently has leasehold
rights to 82,000 acres (33,000 hectares), and has been awarded 210,000 cubic
meters of annual production rights. As of the end of 1995, the three timber
companies had long-term leases for about 1.26 million acres (510,100 hectares),
with annual aggregate cutting rights of 760,000 cubic meters.
The Siziman project, which has been recognized for its sound ecological design,
involved construction by Pioneer of a logging camp, the related infrastructure
required for modern timber harvesting, and a port for shipment. The first
commercial shipments began in 1995.
[Photo]
Strategic Metals
[Photo]
Since 1991, Pioneer, through our affiliates, has been producing high technology
metal alloys and powders, capitalizing on the strength of Russian material
science. Pioneer collaborates with Russian metallurgical concerns, providing
them with the marketing skills and financing necessary to compete in Western
markets.
Pioneer's diverse ventures share a common philosophy: all are undertaken with
thorough appreciation and understanding of local markets, culture and custom.
All represent a long-term commitment to the local economy. And, our knowledge is
leveraged with the skills of expert local partners and staff, who share in the
rewards and risks of the business.
As a young organization in the late 1920's, Pioneer Fund dedicated itself to the
principles of conservative money management -- principles that continue to guide
us as we expand in new directions. Pioneer believes that building on innovation
is the surest path to long-term growth.
9
<PAGE> 12
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Summary of Operations
The Pioneer Group, Inc. (the "Company") reported earnings per share of 90 cents
in 1995, 42 cents lower than 1994's record earnings of $1.32 per share, but 18
cents higher than 1993 earnings of 72 cents. Earnings in 1995 included a loss of
12 cents per share related to expenses the Company incurred in connection with
its postponed effort to sell, in a public global offering, approximately 20% of
its shares of Pioneer Goldfields Limited ("PGL"). Earnings per share have been
adjusted for the 2-for-1 stock splits, effected by the payment of 100% stock
dividends on December 9, 1994, and September 1, 1993, respectively.
[Bar chart]
91--0.58
92--0.59
93--0.72
94--1.32
95--0.90
Earnings Per
Share (Dollars)
[End Bar Chart]
The Company's worldwide financial services businesses earned 48 cents in 1995,
11 cents lower than in 1994, but 12 cents higher than in 1993. Earnings of 6
cents per share from the Company's Russian investment operations acquired in
1995 were more than offset by a 30 cent per share decrease in earnings from the
Company's Polish investment operations, which earned 1 cent in 1995. Assets from
the Company's Polish mutual funds decreased by 53% in 1995 to $275 million at
December 31, 1995. Polish investment operations earned 3 cents per share in
1993. Earnings from the domestic mutual fund business have remained relatively
stable over the last three years. Domestic mutual fund operations earned 35
cents per share in 1995, 36 cents in 1994 and 33 cents in 1993. The Company's
worldwide venture capital operations, net of operating expenses, earned 6 cents
per share in 1995 compared to a loss of 8 cents per share in 1994. Venture
capital operations broke even in 1993.
The Company's gold mining operations, which consist of its wholly owned
subsidiary, PGL, and PGL's 90% owned subsidiary, Teberebie Goldfields Limited
("TGL"), earned 56 cents per share in 1995, 72 cents in 1994 and 42 cents in
1993. Earnings for 1994 included a favorable one time deferred income tax rate
adjustment of 16 cents per share. Net of the deferred income tax adjustment,
gold mining earnings in 1995 were unchanged from the 1994 level. The Company's
Russian powdered metals operations lost 2 cents in 1995, earned 1 cent in 1994
and lost 6 cents per share in 1993.
Financial Services Businesses
1995 Compared to 1994
Revenues. The Company's worldwide financial services businesses have three
principal sources of revenues: fees derived from managing the 30 U.S. registered
investment companies in the Pioneer Family of Mutual Funds and institutional
accounts, fees from underwriting and distribution of mutual fund shares, and
fees derived from acting as shareholder servicing agent. The Company earns
similar revenues from its international investment operations in Poland, Russia,
Ireland, the Czech Republic, and from its joint ventures in India and Taiwan.
Revenues from the worldwide financial services businesses of $108.5 million in
1995 were $4.4 million higher than the 1994 level, as increased shareholder
services fees and revenues from the Company's new Russian investment operations
more than offset the significantly lower underwriting commissions resulting from
significantly lower sales of the Company's Polish mutual funds in 1995.
Management fees of $64.6 million in 1995 were $0.4 million, or 1%, higher than
management fees in 1994. The $7.0 million increase in management fees earned
from the U.S. registered mutual funds was more than offset by a $7.8 million
decrease in management fees earned from the Company's Polish mutual funds.
Record assets under management of $13.7 billion at December 31, 1995, increased
12
<PAGE> 13
by $2.6 billion since the beginning of 1995. The increase was principally
attributable to strong stock market performance. During 1995, the Company
earned $1.2 million in management fees from its U.S. and Polish venture capital
funds.
Underwriting commissions and distribution fees of $8.5 million in 1995 were $4.3
million, or 33%, lower than underwriting commissions and distribution fees in
1994 as a result of significantly lower sales of the Company's Polish mutual
funds. Sales of units of the Polish mutual funds were only $21 million while
redemptions were $0.4 billion in 1995, compared to sales of $0.7 billion and
redemptions of $0.6 billion in 1994. Record U.S. registered mutual fund sales of
$1.8 billion in 1995 were 17% higher than sales during 1994, while redemptions
of $1.1 billion increased by 22%. The Company had net sales of U.S. registered
mutual funds of $0.7 billion in 1995, compared to $0.6 billion in 1994.
Shareholder services fees of $22.5 million in 1995 increased by $2.6 million, or
13%, over 1994, as a result of an increase in the number of shareholder accounts
from 929,000 on January 1, 1995 to 982,000 accounts at year end as well as a fee
increase effective January 1, 1995.
All other income of $12.9 million in 1995 increased by $5.6 million, or 77%,
over 1994, principally from revenues related to interest and dividend income
from the Company's new Russian investment management operations.
Costs and Expenses. Costs and expenses of the worldwide financial services
businesses increased by $17.1 million, or 22%, over 1994 to $94.0 million in
1995, of which $3.4 million was from the Company's new Russian investment
operations accounted for on the consolidation method. Virtually all of the
remaining increase of $13.7 million resulted from higher payroll costs in the
investment management, marketing and shareholder servicing groups, higher costs
related to additional office space, higher costs related to mutual fund
distribution (including printing and mailing of sales literature, paying
commissions earned by the sales force and mutual fund advertising and public
relations) and higher expenses from the amortization of dealer advances.
Other Income and Expense. The Company reported net venture capital investment
portfolio gains (excluding operating expenses) of $5.1 million in 1995 compared
to no portfolio gains or losses in 1994. All of the 1995 gains were generated
from investments in the Company's U.S. venture capital portfolio. The Company's
investments in its own mutual funds, principally during their start-up phase,
contributed net gains of $0.8 million in 1995 compared to net losses of $1.0
million in 1994. The Company realized gains of $3.5 million in 1995 from
investments held by the First Voucher Fund (the "Voucher Fund"), the Russian
investment fund in which the Company owns a 51% interest.
The Company incurred $4.9 million of costs in connection with its postponed
public global offering of approximately 20% of the shares of PGL.
Taxes. The Company's effective tax rate for the worldwide financial services
businesses of 43% for 1995 was essentially unchanged from 1994.
[Bar chart]
91--85,099
92--92,814
93--107,174
94--134,422
95--150,343
Stockholders'
Equity (Thousands
of Dollars)
[End Bar Chart]
1994 Compared to 1993
Revenues. Revenues from the worldwide financial services businesses of $104.1
million in 1994 were $33.9 million, or 48%, higher than the 1993 level, almost
exclusively from higher management fees and underwriting commissions. Management
fees of $64.3 million in 1994 were 63% higher than in 1993. Nearly one half of
the increase resulted from
13
<PAGE> 14
Management's Discussion (Continued)
higher average assets of U.S. registered mutual funds, including funds
previously managed by Mutual of Omaha Fund Management Company ("FMC"). The
Company acquired the management rights to such funds in December 1993. The
remainder of the increase was attributable to assets of the Company's Polish
mutual fund.
Record year-end assets under management of $11.1 billion at December 31, 1994,
reflected an increase of $0.3 billion over 1993. Assets under management at year
end included approximately $600 million from the Company's Polish mutual fund.
Underwriting commissions and distribution fees of $12.8 million in 1994 were 68%
higher than in 1993. Worldwide sales of mutual funds (including reinvested
dividends) were a record $2.2 billion in 1994, $0.7 billion higher than in 1993,
almost evenly divided between the Company's U.S. registered mutual funds and the
Polish mutual fund. Sales of U.S. registered mutual funds of $1.5 billion in
1994, which matched the Company's previous highest level (in 1986), were 39%
higher than in 1993. Redemptions increased by 20% in 1994 over 1993. Polish
mutual fund sales were $734 million in 1994 versus redemptions of $584 million.
In 1993, Polish mutual fund sales were $429 million and redemptions were $34
million.
Shareholder services fees of $19.8 million in 1994 increased by 16% over 1993.
The Company was servicing nearly 929,000 shareholder accounts at December 31,
1994, 55,000 higher than at the end of 1993.
Trustee fees and other income of $7.3 million increased by $1.2 million, or 19%,
in 1994. Higher interest income accounted for approximately 75% of the increase
while the remainder resulted principally from higher trustee fees.
Costs and Expenses. Worldwide financial services businesses costs and expenses
of $76.9 million in 1994 increased by $19.0 million, or 33%, over the 1993
level. Approximately one-third of the increase resulted from higher payroll
costs, principally reflecting costs related to increased staffing in the
investment management, marketing and shareholder servicing groups and higher
bonus expenses related principally to investment management performance.
Approximately one-fourth of the increase reflected higher mutual fund
distribution and advertising costs. Nearly one-fifth of the increase resulted
equally from a full year's amortization of goodwill in 1994 associated with the
Company's acquisition of FMC versus only one month's amortization in 1993 and
higher costs related to additional office space.
Other Income and Expense. The Company reported no venture capital investment
portfolio gains or losses (excluding operating expenses) in 1994 as contrasted
with net gains of $2.0 million in 1993. The Company's results for 1994 reflected
net losses of $0.9 million as contrasted with 1993 net gains of $1.5 million in
market value from the Company's investments in its own mutual funds during their
start-up phases.
Taxes. The Company's effective tax rate for the worldwide financial services
businesses decreased slightly from 43% in 1993 to 42% in 1994.
Liquidity and Capital Resources
IRS regulations require that, in order to serve as trustee, the Company must
maintain a net worth of at least 2% of the assets of Individual Retirement
Accounts and other qualified retirement plans accounts at year end. At December
31, 1995, the Company served as trustee for $4.4 billion of qualified plan
assets, and the ratio of net worth to qualified assets was 3.4%. The Company's
stockholders' equity of $150.3 million at December 31, 1995, would permit it to
serve as trustee for up to $7.5 billion of qualified plan assets.
The Company completed the acquisition of FMC on December 1, 1993. If certain
asset targets are reached, the Company would be obligated to pay up to $3
million of additional consideration to FMC's former owner in 1996.
14
<PAGE> 15
The Company does not believe, however, that the asset target levels will be
reached and that, as a result, the Company will not be obligated to make any
further payments to FMC's former owner.
For certain of the Pioneer Family of Mutual Funds, the Company has introduced a
multi-class share structure. Under the multi-class share structure, which was
first introduced in April 1994, the participating, or "multi-class," funds offer
both traditional front-end load shares (Class A shares) and back-end load shares
(Class B and C shares). On back-end load shares, the investor does not pay any
sales charge unless there is a redemption before the expiration of the minimum
holding period which ranges from three to six years in the case of Class B
shares and is one year in the case of Class C shares. The Company, however, pays
"up-front" commissions to broker-dealers related to sales and service of the
back-end load shares ranging from 2% to 4% of the sales transaction amount on
Class B shares and of 1% on Class C shares. The multi-class funds pay the
Company distribution fees of 0.75% and service fees of 0.25% per annum of their
respective net assets invested in Class B and Class C shares, subject to annual
renewal by the trustees of the funds. Class B shares were introduced in April
1994 and Class C shares were introduced in January 1996. Sales of back-end load
shares were $426 million in 1995 and $136 million in 1994, and dealer advances
totaled $14.9 million in 1995 and $4.7 million in 1994. Dealer advances, net of
accumulated amortization, were $17.1 million at December 31, 1995. In 1996, the
Company intends to finance this program, in part, through the financing facility
described in the section entitled "General."
In April 1995, the Company acquired approximately 51% of the shares of the
Voucher Fund, the largest voucher investment fund established in Russia in
connection with that country's privatization program. The shares were issued by
the Voucher Fund to two newly-formed subsidiaries of Pioneer Omega, Inc.
("Pioneer Omega"), a Delaware corporation in which the Company owns 100% of the
outstanding common stock. In addition to acquiring shares in the Voucher Fund,
Pioneer Omega, acting through its subsidiary Pioneer First Russia, Inc.,
acquired a Russian company that holds rights to manage the Voucher Fund's
investments. Pioneer Omega paid $2.0 million in cash and issued preferred shares
(the "Omega shares") valued at $6 million as consideration for the acquisition
of the management company and related rights. The holder of the Omega shares
has the right to cause the Company to purchase such shares (the "put option"),
and the Company has a corresponding right to purchase such shares from the
holder (the "call option"). The put and call options are each exercisable with
respect to one-third of the Omega shares on the first, second and third
anniversaries of the closing of the transaction. The put and call option
exercise price is $2 million per tranche, plus a 5% per annum premium on the
option exercise price. The Company will pay a total of $6.6 million for the
Omega shares over a three-year period as the put and/or call options are
exercised.
Recent Developments
The Company announced in February 1996 that the Boards of the two largest U.S.
registered mutual funds it manages have approved management fee increases. The
proposed increases are subject to approval by the shareholders of the funds at
meetings to be held in April 1996. If such shareholder approvals are not
obtained, there would be no revenue impact. A third fund implemented a similar,
though not identical, fee increase following shareholder approval in January
1996. If such proposed fee increases are approved, the Company expects that a
significant amount of the increased fee revenues in 1996, estimated at $7.5
million on the basis of current assets under management, will be expended to
meet increases in costs for its investment advisory personnel and purchases of
computer systems to be employed in its investment management business. In
addition, the Company will continue to invest in the growth of this increasingly
competitive business, including product development and distribution initiatives
and enhancements. The potential impact of these fee proposals on the Company's
earnings is not possible to predict at this time.
15
<PAGE> 16
Management's Discussion (Continued)
Natural Resource Development Businesses
[Bar chart]
91*--65,400
92 --126,200
93 --164,900
94 --176,400
95 --235,500
Gold Production
(Ounces)
*Commenced April 1
[End Bar Chart]
Gold Mining Business
The results of the gold mining business are substantially attributable to the
operations of TGL, the principal operating subsidiary of the Company's wholly
owned subsidiary, PGL. The Company's financial statements include an adjustment
to TGL's earnings to give effect to the 10% minority interest in TGL held by the
Government of Ghana.
TGL earns all of its revenues in U.S. dollars and the majority of its
transactions and costs are denominated in U.S. dollars or are based in U.S.
dollars. Consequently, Ghanaian inflation has not had a material effect on TGL's
operations. TGL has Ghanaian cedi denominated costs which consist primarily of
cement, fuel, wages, power and local purchases. While Ghana has experienced
significant inflation over the last three years, the cedi has been characterized
by continuous devaluation against the dollar.
1995 Compared to 1994
In 1995, the gold mining business contributed $14.0 million, or 56 cents per
share, to the Company's earnings compared to $18.3 million, or 72 cents per
share, in 1994. Results in 1994 included a favorable adjustment to earnings of
16 cents per share as a result of a reduction in the applicable Ghanaian income
tax rates for gold mines from 45% to 35% (the same rate for other Ghanaian
industries), which reduced TGL's cumulative deferred income taxes accrued prior
to January 1, 1994, by $4.4 million. Excluding this adjustment, 1995 earnings
were essentially unchanged from 1994.
Revenues increased by 34% to $90.2 million as gold shipments increased by 34% to
235,500 ounces. The average realized price of gold remained unchanged at $383
per ounce. The revenue increase was offset by higher production costs.
The following table provides production numbers and compares TGL's cash costs
and total costs per ounce for 1995 with the prior year.
<TABLE>
<CAPTION>
========================================================================
Twelve months ended
December 31, (Increase)/
1995 1994 Decrease
---- ---- --------
<S> <C> <C> <C>
Production (ounces) 235,500 176,400 (59,100)
======= ======= ========
Cash costs:
Production costs $160 $119 $(41)
Royalties 11 11 -0-
General and administrative 27 31 4
------- ------- --------
Cash costs per ounce 198 161 (37)
------- ------- --------
Non-cash costs:
Depreciation and amortization 67 73 6
Other 3 2 (1)
------- ------- --------
Cost of production per ounce 268 236 (32)
------- ------- --------
Interest and other costs 9 12 3
------- ------- --------
Total costs per ounce $277 $248 $(29)
======= ======= ========
========================================================================
</TABLE>
Production Costs. Production costs represent costs attributable to mining ore
and waste and processing the ore through crushing and processing facilities.
TGL's costs of production are affected by ore grade, gold recovery rates, the
waste to ore, or "stripping" ratio, the age of equipment, the weather,
availability of labor, haul distances, foreign exchange fluctuations and gold
production lag from new operations. In 1995, production costs increased by $41
per ounce to $160 per ounce compared with 1994, principally because of an
increase in the stripping ratio, from 1.81:1 to 2.75:1, and a decrease in the
ore grade from 1.46 to 1.27 grams per tonne, which was greater than anticipated
due to higher than expected mining dilution. In addition, the cost per ounce was
adversely affected by the normal time lag in gold processing inherent in
developing the new heap leach pads at the West Plant.
16
<PAGE> 17
Royalties. Under the Ghanaian Minerals and Mining Law, royalties are levied at
rates ranging from 3% to 12% of operating revenues as determined by reference to
an operating ratio. Such operating ratio represents the percentage that the
operating profits, after giving effect to capital allowances and interest
expense (as permitted by TGL's Deed of Warranty), bears to gold sales. In 1994
and 1995, the royalty rate payable by TGL remained at 3% of operating revenues,
the minimum permitted by law, principally because of a sustained level of
capital expenditures, and associated capital allowances, since the inception of
the project.
General and Administrative Costs. General and administrative costs consist
principally of administrative salaries and related benefits, travel expenses,
insurance, utilities, legal costs, employee meals, rents and vehicle
expenditures. These costs increased by 17%, primarily as a result of increases
in salaries and benefits relating to the 1995 collective bargaining agreement,
and in commercial insurance premiums, employee transportation costs, consulting
expenses and bank charges. This increase in costs was more than offset by higher
production levels, resulting in a net decrease in costs of $4 per ounce in 1995.
Depreciation and Amortization. Depreciation and amortization is calculated using
units-of-production and straight-line methods designed to fully depreciate
property, plant and equipment over the lesser of their estimated useful lives or
ten years. Development cost amortization decreased by $4 per ounce principally
because development costs at the West Plant expansion were significantly lower
than those at the original East Plant. Development costs at each of the East
Plant and the West Plant are amortized over 950,000 ounces of production. As a
result, since the West Plant was commissioned in the third quarter of 1994, the
weighted average amortization per ounce decreased slightly.
Other. Other costs represent a provision for future reclamation costs and costs
related to exploration activities conducted by TGL at the Teberebie concessions
and in other parts of Ghana. The increase of $1 per ounce in 1995 compared with
1994 was attributable to an increase in exploration core drilling.
[Bar chart]
91--2.2
92--4.5
93--4.8
94--6.7
95--9.1
In-Situ Proven &
Probable Reserves
(Millions of Ounces)
[End Bar Chart]
Interest and Other Costs. The $3 per ounce decrease in interest expense and
other costs in 1995 compared to 1994 was attributable principally to lower
interest expense and gold price floor program premiums, offset partially by an
increase in foreign exchange losses. Since the beginning of 1994, outstanding
loan principal balances decreased by $8.9 million resulting in a $2 per ounce
decrease in interest expense. In addition, put option premiums incurred to
maintain a gold price floor program of $310 per ounce decreased by approximately
$2 per ounce, principally because of higher prevailing market prices when such
options were purchased. In 1995, TGL experienced an increase in foreign exchange
losses of less than $1 per ounce compared with the prior year.
Income Taxes. The statutory tax rate for mining companies in Ghana in 1995 and
1994 was 35%. The effective tax rates in 1995 and 1994 were essentially
unchanged.
1994 Compared to 1993
In 1994, the gold mining business contributed $18.3 million, or 72 cents per
share, to the Company's earnings. This included a favorable adjustment to
earnings of 16 cents per share as a result of a reduction in the applicable
Ghanaian income tax rates for gold mines from 45% to 35% (the same rate for
other Ghanaian industries), which reduced TGL's cumulative deferred income taxes
accrued prior to January 1, 1994, by $4.4 million. Excluding this adjustment,
earnings increased by $3.5 million, or 14 cents per share, compared with 1993.
17
<PAGE> 18
Management's Discussion (Continued)
Revenues increased by 14% to $67.6 million, as both gold shipments and the
average realized price of gold increased by 7% to 176,400 ounces and $383 per
ounce, respectively, compared with 1993. The increase in revenues was largely
offset by increases in cash costs per ounce.
The following table provides production numbers and
compares the cash and total cost per ounce for 1994 with the prior year:
<TABLE>
<CAPTION>
========================================================================
Twelve months
ended
December 31, (Increase)/
1994 1993 Decrease
--------------------- -----------
<S> <C> <C> <C>
Production (ounces) 176,400 164,900 (11,500)
======= ======= ========
Cash costs:
Production costs $119 $92 $(27)
Royalties 11 11 -0-
General and administrative 31 28 (3)
-------- ------- --------
Cash costs per ounce 161 131 (30)
Non-cash:
Depreciation and amortization 73 79 6
Other 2 2 -0-
-------- ------- --------
Costs of production per ounce 236 212 (24)
Interest and other costs 12 17 5
-------- ------- --------
Total costs per ounce $248 $229 $(19)
======== ======= ========
========================================================================
</TABLE>
Production Costs. The $27 per ounce increase in production costs during 1994 was
attributable to higher stripping ratios, the mining of lower grade ore and
start-up costs related to the West Plant mine expansion in 1994. The stripping
ratio increased from 1.28:1 to 1.81:1, while the ore grade mined decreased from
1.73 to 1.46 grams per tonne compared with 1993.
Royalties. In 1993 and 1994, the royalty rate payable by TGL represented
approximately 3% of revenues, the minimum permitted by law, principally because
of a sustained level of capital expenditures and associated capital allowances
since the inception of the project.
General and Administrative Costs. General and administrative costs increased by
$3 per ounce compared with 1993 as an overall cost increase of $5 per ounce was
offset, in part, by a reduction of $2 in the cost per ounce associated with
higher production levels. TGL experienced increases in salaries and wages,
commercial insurance premiums, customs duties and clearing costs, and employee
meals expense. These increases were attributable to manpower and equipment
additions associated with the West Plant mine expansion.
Depreciation and Amortization. Depreciation and amortization expense decreased
by $6 per ounce compared with 1993, principally because original mining
equipment, which was depreciated rapidly over 400,000 ounces, was fully
depreciated by the end of the second quarter of 1994.
Interest and Other Costs. Interest and other costs decreased by $5 per ounce
compared with 1993. Since the beginning of 1993, outstanding loan principal
balances decreased by $15.3 million, resulting in a $3 per ounce decrease in
interest expense. In addition, foreign exchange losses decreased by $2 per ounce
as foreign currency exposure decreased and the devaluation of the cedi decreased
from 56% in 1993 to 28% in 1994.
Income Taxes. Under the laws of the Republic of Ghana, income taxes may be
deferred until recovery of capital investment, so TGL had accrued deferred
income taxes of $19.8 million for book purposes from the commencement of
commercial operations in April 1991 through December 31, 1993. In the first
quarter of 1994, the Republic of Ghana reduced the income tax rate for mining
companies from 45% to 35%. As a result, 1994 earnings were enhanced by 16 cents
per share, or 90% of a $4.4 million reduction in income taxes deferred through
December 31, 1993. The 1994 effective tax rate was 36% as compared to 48% in
1993.
Liquidity and Capital Resources
Cash flow. PGL's cash balances decreased by $1.1 million to $2.4 million during
1995. Cash generated from operating
18
<PAGE> 19
activities aggregated $21.9 million while capital expenditures and third-party
loan principal payments were $16.6 million and $3.6 million, respectively. Major
capital expenditures by TGL during 1995 included $6.5 million for leach pads and
ponds, $2.9 million for mining equipment, $2.6 million for equipment related to
the Phase III mine expansion (South Plant) and $1.5 million for stand-by power
generators. TGL continued to generate sufficient operating cash flow to fund all
of its scheduled third-party debt service payments and short-term cash
commitments.
Third-Party Debt. At the end of 1995, third-party debt aggregated $4.2 million,
including $1.7 million which was guaranteed by the Company. Excluding Phase III
expansion financing, scheduled third-party debt service for 1996 is expected to
aggregate $2.2 million, all of which is expected to be funded by mining
operations revenues.
Risk Management. In the past, TGL purchased put options to secure a minimum
selling price for its gold. All outstanding options expire on March 31, 1996,
and TGL currently does not intend to renew these options unless the price of
gold declines to below $375 per ounce.
The Company maintains $64.8 million of "political risk" insurance principally
from the Overseas Private Investment Corporation ("OPIC") covering 90% of its
equity and loan guarantees. This insurance also covers 90% of the Company's
proportionate share of TGL's cumulative retained earnings. In addition, the
Company maintains standby coverage of $2.1 million, which can be activated
semiannually, to cover increases in the Company's proportionate share of TGL's
cumulative retained earnings. In addition to other commercial insurance
policies, TGL has secured business interruption coverage of up to $19.0 million
for losses associated with machinery breakdown and property damage and to defray
continuing infrastructure and interest costs.
Phase III Mine Expansion. In July 1995, the Board of Directors of TGL approved
the Phase III expansion of the TGL mine. Phase III will include a third heap
leach operation and the construction of a near-pit gyratory crushing facility
which will act as the primary crushing facility for the West Plant and the new
South Plant. Phase III will also gradually introduce a new and larger mining
fleet, with the objective of mining at an annualized rate of approximately 60
million tonnes of material per year (including approximately 12 million tonnes
of ore) and raising overall gold production to at least 400,000 ounces per year
when Phase III is completed (expected in 1998). Realization of this objective is
subject to the uncertainties inherent in any mining and processing operation.
The initial work on the project has commenced. The major crushing equipment has
been ordered, and the initial mining equipment, consisting of four Caterpillar
("CAT") 785 trucks and a CAT 5230 hydraulic shovel, has been delivered to the
site and good progress is being made in training operators on the new equipment.
Total capital investment planned for 1996 is approximately $68 million,
including $46 million in expansion capital. Expansion capital represents
approximately $32 million for the purchase of crushing and processing facilities
and approximately $14 million for the purchase of mining equipment.
Financing Facilities. In September 1995, OPIC executed a commitment letter
(which expires May 1, 1996) with TGL and the Company pursuant to which OPIC
agreed, subject to the fulfillment of certain conditions, to finance up to $54
million in connection with the Phase III expansion. As of March 11, 1996, TGL
and the Company have not executed definitive loan agreements with respect to
such OPIC guaranteed financing, and there can be no assurance that such OPIC
guaranteed financing will become available or that it will be available on
terms acceptable to TGL and the Company. In order to facilitate financing, TGL
has obtained credit approval from Caterpillar Financial Services Corporation, a
wholly owned subsidiary of Caterpillar Inc. (collectively, "Caterpillar"),
pursuant to which Caterpillar has agreed, subject to the fulfillment of certain
conditions, to provide a revolving credit facility of up to $21 million to
finance the purchase of Caterpillar and other mining equipment. Such revolving
facility would be subject to renewal in January 1997. In March 1996, TGL
executed a commitment letter to
19
<PAGE> 20
Management's Discussion (Continued)
utilize $8.4 million of such facility. There can be no assurance that TGL will
be able to obtain the Caterpillar credit facility on terms favorable to TGL or
the Company. On March 6, 1996, TGL executed a loan agreement with Enskilda, a
division of Skandinaviska Enskilda Banken, pursuant to which Enskilda has agreed
to provide a direct loan of Swedish Krona 94.5 million (approximately $13.6
million) to finance the gyratory crusher and related equipment procured from
Svedala Crushing and Screening AB. This loan is guaranteed by the Swedish Export
Credits Board. As TGL obtains these alternative sources of financing, TGL
intends to proportionately reduce the amount of its OPIC guaranteed financing.
<TABLE>
Reserves. The following table sets forth the in situ mineable proven and
probable reserves of TGL as at December 31, 1995. The cut-off grades used to
delineate the reserves are 0.765 grams per tonne for crushed ore and 0.25 grams
per tonne for run-of-mine ore at a gold price of $385 per ounce.
<CAPTION>
=================================================================================================================
Mineable Reserves
-----------------
Crushed Ore Run-of-Mine Ore
Grams Grams
per per
Tonnes Tonnes Ounces Tonnes Tonnes Ounces
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Total Proven 149,236,000 1.46 7,039,000 49,859,000 0.54 865,000
Total Probable 22,740,000 1.41 1,030,000 8,625,000 0.56 154,000
----------- ---- --------- ---------- ---- ---------
Total Reserves 171,976,000 1.46 8,069,000 58,484,000 0.54 1,019,000
=========== ==== ========= ========== ==== =========
Total Mineable Reserve Ounces: 9,088,000
=========
=================================================================================================================
</TABLE>
Based on the current technology at the mine, it is estimated that recoverable
gold from these open-pit reserves will aggregate approximately 6.7 million
ounces.
Recent Developments
As with all heap leach operations, there is a time lag between when ore is
placed on a heap, after mining and certain processing costs have been incurred,
and when gold from that ore is recovered and revenue realized. Therefore, cash
costs tend to rise during periods when significant heap leach pad development
occurs, such as after an expansion or any large increase in ore production.
During 1995, material continued to be added to new heaps which form part of the
Phase II expansion. Mining and certain processing costs were incurred at this
stage but, due to the time lag in leaching, recovery rates were well below their
theoretical maximum. This effect, coupled with a higher stripping ratio and the
mining of lower grade ore, resulted in a 23% increase in the cash costs per
ounce. The Company believes that the average cash costs per ounce will be
favorably affected by the economies of scale expected from the Phase III
expansion. As explained above, however, there will be periods in the future when
cash costs per ounce rise, primarily as a result of the production lag inherent
in starting new heaps and lifts.
Production in the first quarter of 1996 is expected to decrease below production
in the fourth quarter of 1995. In the first half of 1996, production is targeted
at approximately 120,000 ounces with second half production targeted at
approximately 135,000 ounces as TGL begins to introduce new and larger capacity
replacement mining equipment.
TGL's original production target for 1996 was 270,000 ounces of gold, as
announced by the Company in early February 1996. After further review of
production figures from the late fourth quarter of 1995 and from January 1996,
TGL's management recently revised its 1996 production target downward to 255,000
ounces. The lower figure reflects a reduction in anticipated output levels in
the early part of 1996, resulting from events occurring in late 1995 and early
1996. These included (a) lower than anticipated equipment availability, which
led to a smaller tonnage of ore being mined, crushed and placed on the leach
pads, and (b) mining of a higher proportion of ore than previously estimated
from the lower-grade southern part of the Teberebie pit. The reduced tonnages
placed on the leach pads in late 1995 and the lower grade of ore being leached
at present will result in lower gold output in the first quarter of 1996. While
the Company believes that its current production target of 255,000 ounces for
1996 is achievable, realization of production targets is subject to the
uncertainties inherent in any mining and processing operation.
20
<PAGE> 21
Timber Business
Liquidity and Capital Resources
The Company's Russian timber venture, Forest Starma, in which the Company has a
71% direct interest (recently increased from 63%) and a 3% indirect interest is
pursuing the development of timber production under two long-term leases
comprising 88,800 hectares (approximately 219,500 acres) in the aggregate with
annual cutting rights of 210,000 cubic meters awarded to the venture in the
Khabarovsk Territory of Russia. Forest Starma is in the process of securing
additional cutting rights of approximately 90,000 cubic meters per year. Forest
Starma has developed a site, including a jetty, from which it exports timber for
markets in the Pacific Rim, primarily Japan. Timber harvesting commenced in the
first quarter of 1995 and the first shipments of timber (acquired in the
development phase), totaling approximately 30,000 cubic meters, occurred in the
third and fourth quarters of 1995. The related revenues were used to offset
development costs.
Capital required by this venture is now projected at approximately $36.4 million
through the end of 1996 including $20.1 million in subordinated debt provided by
the Company and $9.3 million financed pursuant to a conditional loan commitment
already in place. The $9.3 million loan, which initially would be guaranteed by
the Company, would cease to be guaranteed when the project meets certain
production and cash flows tests. During 1996, the Company expects to provide
additional bridge financing as Forest Starma applies for up to $7.0 million in
third-party financing.
Investments by the Company in Forest Starma aggregated $29.4 million (net of an
assumed value added tax recovery on imports) at December 31, 1995, $9.3 million
of which is considered bridge financing by the Company subject to repayment upon
receipt of third party loan proceeds. Forest Starma is expected to reach a
production level of approximately 220,000 cubic meters per year by the end of
1996.
The Company has secured OPIC political risk insurance in amount of up to $47
million which would protect 90% of the Company's equity investment and loans and
a proportionate share of cumulative retained earnings.
[Bar chart]
91--0.2025
92--0.21
93--0.225
94--0.315
95--0.40
Cash Dividends
Per Share
(Dollars)
[End Bar Chart]
In November 1995, Amgun-Forest and Udinskoye each executed a long-term lease (50
years) relating to timber harvesting. The Amgun-Forest lease covers 264,700
hectares (approximately 654,000 acres) with annual cutting rights of 350,000
cubic meters while the Udinskoye lease covers 156,600 hectares (approximately
387,000 acres) with annual cutting rights of 200,000 cubic meters. Work on the
feasibility study for Amgun-Forest has commenced, and the Udinskoye feasibility
study will be carried out at a later date. The studies will form the basis for
estimating capital requirements for these projects. Preliminary estimates for
these two projects are that, prior to securing third-party financing, the
Company will provide funding of approximately $1.3 million in 1996.
General
The Company's liquid assets consisting of cash and marketable securities
(exclusive of gold mining operations) increased by $7 million in 1995 to $33
million due to the Company's various financing activities in 1995.
On February 28, 1995, the Company entered into an agreement with a commercial
bank providing for a $30 million unsecured line of credit. Advances under the
line bear interest at the Company's option at (a) the higher of the bank's base
lending rate or the federal funds rate plus 0.50%,
21
<PAGE> 22
Management's Discussion (Continued)
(b) the London Interbank Offered Rate ("LIBOR") plus 1.10%, or (c) at a money
market rate set by the bank. The line, which expires on April 30, 1996, provides
that the Company must pay additional interest to the bank at the rate of 0.25%
per annum of the unused portion of the line. On May 22, 1995, the Company
entered into a second agreement with the commercial bank providing for a $10
million unsecured line of credit with substantially the same terms as the first
agreement including applicable interest rates and expiration date. This second
line was subsequently increased to $15 million on October 20, 1995, to $30
million on December 20, 1995, and to $40 million on February 27, 1996. At March
11, 1996, the Company had $61.5 million outstanding under the lines.
The Company entered into a commitment letter agreement on February 29, 1996,
with the commercial bank for a new senior credit facility in the amount of $115
million. Such commitment is subject to the fulfillment of certain conditions and
expires on April 30, 1996. Under the proposed new facility, the Company can
borrow up to $35 million under a revolving credit agreement ("RCA") to finance
dealer advances relating to sales of back-end load shares of the Company's
domestic mutual funds. The RCA is subject to annual renewal by the Company and
the commercial bank. In the event the RCA is not renewed, at maturity, it will
automatically convert to a five-year term loan. Advances under the RCA bear
interest, at the Company's option, at (a) the higher of the bank's base lending
rate or the federal funds rate plus 0.50% or (b) LIBOR plus 1.25%. In
addition, the Company can borrow up to $80 million for general corporate
purposes and to refinance existing debt. This loan is payable in full in five
years from the first drawdown. Advances under this loan bear interest, at the
Company's option, at (a) the higher of the bank's base lending rate or the
federal funds rate plus 0.50% or (b) LIBOR plus the applicable margin, tied
to the Company's financial performance, of either 0.75%, 1.25% or 1.50%, as
defined under the commitment letter. The senior credit facility provides that
the Company must pay additional interest to the bank at the rate of 0.375% per
annum of the unused portion of the facility and an annual arrangement fee of
$35,000. The commitment fees are approximately $0.7 million.
Future Operating Results
Certain of the information contained in this Annual Report, including
information with respect to the Company's plans and strategies for its worldwide
financial services and natural resource development businesses, consists of
forward-looking statements. For this purpose, any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects" and similar expressions are intended to identify
forward-looking statements. Important factors that could cause actual results to
differ materially from those indicated by such forward-looking statements
include, but are not limited to, the following.
The Company derives a significant portion of its revenues from investment
management fees, underwriting and distribution fees and shareholder services
fees. Success in the investment management and mutual fund share distribution
businesses is substantially dependent on investment performance. Good
performance stimulates sales of shares and tends to keep redemptions low. Sales
of shares generate higher management fees and distribution fees (which are based
on assets of the funds). Good performance also attracts institutional accounts,
Conversely, relatively poor performance results in decreased sales and increased
redemptions and the loss of institutional accounts, with corresponding decreases
in revenues to the Company. Investment performance may also be affected by
economic or market conditions which are beyond the control of the Company.
The mutual fund industry is intensely competitive. Many organizations in this
industry are attempting to sell and service the same clients and customers, not
only with mutual fund investments but with other financial services products.
22
<PAGE> 23
Some of the Company's competitors have more products and product lines and
substantially greater assets under management and financial resources.
As described above, the Company also offers a multi-class share structure. Under
such structure, the Company pays a commission on the sale but the investor does
not pay any sales charge unless it redeems before the expiration of the minimum
holding period, which ranges from three to six years in the case of Class B
Shares and which is one year in the case of Class C Shares. The Company's cash
flow and results of operations may be adversely affected by vigorous sales of
back-end load shares because its recovery of the cost of commissions paid up
front to dealers is spread over a period of years. During this period, the
Company bears the costs of financing and the risk of market decline.
The businesses of the Company and its financial services subsidiaries are
dependent upon their associations with the Pioneer Family of Mutual Funds with
which they have contractual relationships. In the event any of the management
contracts, underwriting contracts or service agreements were canceled or not
renewed pursuant to their terms, the Company may be substantially adversely
affected.
The Securities and Exchange Commission has jurisdiction over registered
investment companies, registered investment advisers, broker-dealers and
transfer agents and, in the event of a violation of applicable rules or
regulations by the Company or its subsidiaries, may take action which could have
a serious effect on the Company.
Because a significant portion of the Company's revenues and net income are
derived from the mining and sale of gold by TGL, the Company's earnings are
directly related to the price of gold. Gold prices have historically fluctuated
significantly and are affected by numerous factors, including expectations for
inflation, the strength of the U.S. dollar, global and regional demand and
political and economic conditions. If, as a result of a decline in gold prices,
the Company's revenues from gold sales were to fall below cash costs of
production, and to remain below its cash costs of production for any substantial
period, the Company could determine that it is not economically feasible to TGL
to continue commercial production.
While an internationally recognized engineering firm audited and verified TGL's
gold reserves in August 1995, and indicated that the reserves are estimated in
accordance with good engineering practices using current cost estimates, reserve
estimates are necessarily imprecise and depend to some extent on statistical
inferences drawn from limited drilling which may, on occasion, prove unreliable.
Reserve estimates are based upon a number of assumptions, including the price of
gold, cut-off grades and operating costs. Increases in operating costs, reduced
recovery rates or market price fluctuations of gold may render all or a portion
of such reserves uneconomic to mine.
TGL has recently discovered clay-filled fault zones below and parallel to the
lowest ore zone at the Teberebie mine that create areas of slope instability
within the pit. This instability may result in failures of sections of the
footwall of the mine, especially during the rainy season. TGL has engaged a
geo-technical consultant to conduct a study to identify the extent of, and
address a solution to, this instability. It is possible that it may be necessary
to mine in a manner which results in more footwall waste being removed than
presently planned. This may result in an increase in the average stripping
ratio. It is not yet possible to determine the impact, if any, of slope
instability on operating costs. A significant increase in the average stripping
ratio, however, would increase production costs.
To attain projected levels of gold production, TGL must successfully complete
its Phase III expansion, and the new crushing facility to be constructed in
connection with Phase III, the South Plant, must become operational on time. The
Company believes that the construction schedule for Phase III is feasible. There
can, however, be no assurance
23
<PAGE> 24
Management's Discussion (Continued)
that Phase III will in fact be completed or become operational in accordance
with TGL's current proposed construction schedule. As a result, future gold
production achieved by the Teberebie mine may fail to meet the Company's current
projections.
TGL is dependent upon a number of key supplies for its mining operations,
including electricity, explosives, diesel fuel, lubricants, tires and sodium
cyanide. There can be no assurance that a disruption in the supplies to TGL of
these key materials will not occur and adversely affect the Company's
operations.
The operations at TGL depend on the ability to recruit, train and retain
employees with the requisite skills to operate large-scale mining equipment.
Although TGL offers its employees an attractive compensation package,
competition for skilled labor is strong among the various mines in Ghana. There
can be no assurance that the Company's operations will not be adversely affected
by a shortage of skilled laborers or by an increase in the time required to
fully train new employees.
The Company has incurred considerable expenses in connection with the Forest
Starma timber project located in the Russian Far East. Although the Company has
commenced harvesting and has made shipments, Forest Starma is still in the
development stage. While the Company continues to believe that the project will
achieve commercial feasibility, there can be no assurance that it will do so.
The Company has a significant number of operations and investments located
outside of the U.S., including the gold mining operation at TGL and the timber
and investment operations in Russia. Foreign operations and investments may be
adversely affected by exchange controls, currency fluctuations, taxation,
political instability and laws or policies of the particular countries in which
the Company may have operations. There is no assurance that permits,
authorizations and agreements to implement plans at the Company's projects can
be obtained under conditions or within time frames that make such plans
economically feasible, that applicable laws or the governing political
authorities will not change, or that such changes will not result in the
Company's having to incur material additional expenditures. While the Company
is currently applying for political risk insurance to cover its Russian
investment operations, there can be no assurance that it will be able to obtain
such coverage.
The Company believes that it is in sound financial condition, that it has
sufficient liquidity from operations and financing facilities to cover
short-term commitments and contingencies and that it has adequate capital
resources to provide for long-term commitments.
24
<PAGE> 25
ASSETS UNDER MANAGEMENT AT DECEMBER 31:
Dollars in Millions
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
U.S. Registered Mutual Funds $12,701 $ 9,925 $ 9,854 $7,330 $6,871
Non-U.S. Registered Mutual Funds 280 589 388 -- --
------- ------- ------- ------ ------
Total Registered Mutual Funds 12,981 10,514 10,242 7,330 6,871
Closed-end and subadvised funds and
private institutional accounts* 764 589 524 261 269
------- ------- ------- ------ ------
Total $13,745 $11,103 $10,766 $7,591 $7,140
======= ======= ======= ====== ======
<FN>
* Excludes assets of funds managed by foreign joint ventures and venture
capital pools.
</TABLE>
<TABLE>
SALES OF MUTUAL FUND SHARES:
Dollars in Millions
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991
------ ------ ------ ---- -----
<S> <C> <C> <C> <C> <C>
U.S. Registered Mutual Funds:
Sales* $1,752 $1,499 $1,076 $723 $ 624
Redemption of shares 1,050 860 714 784 939
------ ------ ------ ---- -----
Net sales (redemptions) of shares $ 702 $ 639 $ 362 $(61) $(315)
====== ====== ====== ==== =====
Year Ended December 31,
1995 1994 1993 1992 1991
------ ------ ------ ---- -----
Non-U.S. Registered Mutual Funds:
Sales* $ 25 $734 $429 -- --
Redemption of shares 381 584 34 -- --
------ ------ ------ -- -----
Net (redemptions) sales of shares $ (356) $150 $395 -- --
====== ====== ====== ==== =====
<FN>
* Includes reinvestment of dividends, but excludes money market funds and
funds managed by foreign joint ventures.
</TABLE>
10
<PAGE> 26
<TABLE>
QUARTERLY RESULTS
Dollars in Thousands Except Per Share Amounts
<CAPTION>
Total Net Earnings
Revenues and Sales Income Per Share((1))
------------------ ------ --------------
<S> <C> <C> <C>
1995 by Quarter
March 31 $ 45,679 $ 5,797 $0.23
June 30 46,553 7,329 0.29
September 30 51,240 6,273 0.25
December 31 55,245 3,412 0.13 ((2))
-------- ------- -----
$198,717 $22,811 $0.90
======== ======= =====
1994 by Quarter
March 31 $ 42,558 $11,891 $0.47 ((3))
June 30 39,816 6,847 0.27
September 30 45,313 8,280 0.33
December 31 44,015 6,442 0.25
-------- ------- -----
$171,702 $33,460 $1.32
======== ======= =====
<FN
((1)) Adjusted for December 1, 1994 2-for-1 stock split effected in the form
of a 100% stock dividend.
((2)) Includes loss of 12 cents per share associated with expenses incurred
by the Company in connection with its postponed effort to sell in a
global offering approximately 20% of its shares of Pioneer Goldfields
Limited.
((3)) Includes a favorable adjustment to earnings of 16 cents per share as a
result of a reduction in the applicable Ghanaian income tax rates for
gold mines from 45% to 35% (the same rate for other Ghanaian
industries), which reduced Teberebie Goldfields Limited's cumulative
deferred income taxes accrued prior to January 1, 1994, by $4.4
million.
</TABLE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA:
Dollars in Thousands Except Per Share Amounts
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991
-------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Results of Operations
Revenues and sales $198,717 $171,702 $129,403 $101,802 $ 80,919
Costs and expenses 158,908 119,568 94,142 73,616 57,835
Unrealized and realized (gains)
losses on venture capital and
marketable securities investments,
net (9,345) 946 (3,468) (2,657) (4,359)
Interest expense 1,024 1,305 2,388 1,427 1,580
Minority interest 3,123 2,129 1,409 1,169 487
Public offering costs 4,863 -- -- -- --
Other, net 735 112 480 712 --
---------- ---------- ---------- ---------- ----------
Income before provision for federal,
state and foreign income taxes 39,409 47,642 34,452 27,535 25,376
Net provision for federal, state and
foreign income taxes 16,598 14,182 16,322 12,937 10,938
---------- ---------- ---------- ---------- ----------
Net income $ 22,811 $ 33,460 $ 18,130 $ 14,598 $ 14,438
========== ========== ========== ========== ==========
Earnings per share* $0.90 $1.32 $0.72 $0.59 $0.58
Cash dividends per share* $0.40 $0.315 $0.225 $0.21 $0.203
Weighted average common and common
equivalent shares outstanding* 25,311,000 25,354,000 24,976,000 24,824,000 24,766,000
Long-term notes payable $11,048 $9,101 $13,306 $11,972 $17,070
Total assets $319,069 $202,085 $172,295 $134,705 $123,817
Stockholders' equity $150,343 $134,422 $107,174 $92,814 $85,099
Stockholders' equity per share* $6.05 $5.45 $4.36 $3.81 $3.46
Return on average stockholders'
equity 16% 28% 18% 16% 18%
Return on revenues 11% 19% 14% 14% 18%
<FN>
* Adjusted for December 1, 1994, and September 1, 1993, 2-for-1 stock splits
effected in the form of 100% stock dividends.
</TABLE>
11
<PAGE> 27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of The Pioneer Group, Inc.:
We have audited the accompanying consolidated balance sheets of The
Pioneer Group, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income, changes
in stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Pioneer Group, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
March 11, 1996
25
<PAGE> 28
CONSOLIDATED STATEMENTS OF INCOME
Dollars in Thousands Except Per Share Amounts
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
--------- --------- ------------
<S> <C> <C> <C>
Revenues and sales:
Investment management fees $ 64,604 $ 64,251 $ 39,455
Underwriting commissions and distribution fees 8,515 12,768 7,609
Shareholder services fees 22,447 19,820 17,071
Trustee fees and other income 12,909 7,279 6,117
---------- ---------- ------------
Revenues from financial services businesses 108,475 104,118 70,252
Gold sales 90,242 67,584 59,151
---------- ---------- ------------
Total revenues and sales 198,717 171,702 129,403
---------- ---------- ------------
Costs and expenses:
Management, distribution, shareholder service and administrative
expenses 94,003 76,885 57,874
Gold mining operating costs and expenses 64,905 42,683 36,268
---------- ---------- ------------
Total costs and expenses 158,908 119,568 94,142
---------- ---------- ------------
Other (income) expense:
Unrealized and realized (gains) losses on venture capital and
marketable securities investments, net (9,345) 946 (3,468)
Interest expense 1,024 1,305 2,388
Minority interest 3,123 2,129 1,409
Public offering costs 4,863 -- --
Other, net 735 112 480
---------- ---------- ------------
Total other (income) expense 400 4,492 809
---------- ---------- ------------
Income before provision for federal, state and foreign income taxes 39,409 47,642 34,452
Provision for federal, state and foreign income taxes 16,598 18,613 16,322
Cumulative deferred foreign income tax adjustment -- (4,431) --
---------- ---------- ------------
Net provision for federal, state and foreign income taxes 16,598 14,182 16,322
---------- ---------- ------------
Net income $ 22,811 $ 33,460 $ 18,130
========== ========== ============
Earnings per share $0.90 $1.32 $0.72
========== ========== ============
Weighted average common and common equivalent shares outstanding 25,311,000 25,354,000 24,976,000
========== ========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE> 29
<TABLE>
CONSOLIDATED BALANCE SHEETS
Dollars in Thousands Except Per Share Amount
<CAPTION>
December 31,
1995 1994
-------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, at cost which approximates value $ 27,809 $ 23,118
Investment in marketable securities, at value 7,630 6,458
Receivables:
From securities brokers and dealers for sales of mutual fund shares 12,385 7,406
For gold shipments 5,410 4,393
Other 14,085 10,167
Mining inventory 15,605 11,881
Other current assets 8,295 4,696
-------- --------
Total current assets 91,219 68,119
-------- --------
Noncurrent assets:
Mining operations:
Mining equipment and facilities (net of accumulated depreciation of $42,631 in 1995
and $29,793 in 1994) 46,980 44,337
Deferred mining development costs (net of accumulated amortization of $11,420 in 1995
and $9,022 in 1994) 9,622 11,061
Cost of acquisition in excess of net assets acquired (net of accumulated amortization
of $6,501 in 1995 and $3,863 in 1994) 24,784 25,130
Long-term venture capital investments, at value (cost $38,802 in 1995 and $18,181 in
1994) 44,520 19,835
Long-term investments, at cost 16,934 --
Timber project in development:
Timber equipment and facilities 8,130 4,485
Deferred timber development costs 21,140 7,664
Building in progress 12,239 --
Furniture, equipment and leasehold improvements (net of accumulated depreciation and
amortization of $10,558 in 1995 and $9,724 in 1994) 13,766 9,837
Dealer advances (net of accumulated amortization of $2,563 in 1995 and $346 in 1994) 17,095 4,399
Other noncurrent assets 12,640 7,218
-------- --------
Total noncurrent assets 227,850 133,966
-------- --------
$319,069 $202,085
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Payable to funds for shares sold $ 12,369 $ 7,075
Accrued expenses and accounts payable 27,242 13,675
Accrued employees' compensation 1,705 1,547
Accrued income taxes 1,169 748
Current portion of notes payable 56,053 13,597
-------- --------
Total current liabilities 98,538 36,642
-------- --------
Noncurrent liabilities:
Notes payable, net of current portion 11,048 9,101
Deferred income taxes, net 14,503 16,907
-------- --------
Total noncurrent liabilities 25,551 26,008
-------- --------
Total liabilities 124,089 62,650
-------- --------
Minority Interest 44,637 5,013
-------- --------
Commitments and Contingencies (Note 10)
Stockholders' Equity:
Common stock, $0.10 par value; authorized 60,000,000 shares; issued 24,833,508
shares in 1995 and 24,697,960 shares in 1994 2,483 2,470
Paid-in capital 7,660 3,599
Retained earnings 143,603 130,715
Treasury stock at cost, 0 shares in 1995 and 28,772 shares in 1994 -- (167)
-------- --------
153,746 136,617
Less--Deferred cost of restricted common stock issued (3,403) (2,195)
-------- --------
Total stockholders' equity 150,343 134,422
-------- --------
$319,069 $202,085
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE> 30
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Dollars in Thousands Except Per Share Amounts
<TABLE>
<CAPTION>
Deferred
Common Stock Cost Total
---------------------------- of Stock-
Shares Paid-in Retained Treasury Restricted holders'
Issued Amount Capital Earnings Stock Stock Equity
---------- ------ ------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 6,174,490 $ 617 $ 3,515 $ 92,420 $(1,914) $(1,824) $ 92,814
---------- ------ ------- -------- -------- ------- --------
Add (Deduct):
Net income -- -- -- 18,130 -- -- 18,130
Dividends paid--$0.225 per share -- -- -- (5,524) -- -- (5,524)
Stock split in the form of a
100% stock dividend 6,174,490 618 (618) -- -- -- --
Shares awarded under the 1990
restricted stock plan, 164,800
shares -- -- 332 -- 896 (1,223) 5
Amortization of deferred cost of
restricted common stock issued -- -- -- -- -- 929 929
Additional tax benefits from
stock plans -- -- 557 -- -- -- 557
Forfeitures of shares awarded
under the 1981 and 1990
restricted stock plans (2,820
shares) -- -- -- -- (16) 16 --
Exercise of stock options
awarded under the 1988 stock
option plan (62,800 shares) -- -- (78) -- 341 -- 263
---------- ------ ------- -------- -------- ------- --------
Balance, December 31, 1993 12,348,980 $1,235 $ 3,708 $105,026 $ (693) $(2,102) $107,174
---------- ------ ------- -------- -------- ------- --------
Add (Deduct):
Net income -- -- -- 33,460 -- -- 33,460
Dividends paid--$0.315 per share -- -- -- (7,771) -- -- (7,771)
Stock split in the form of a
100% stock dividend 12,348,980 1,235 (1,235) -- -- -- --
Shares awarded under the 1990
restricted stock plan, (101,460
shares) -- -- 736 -- 551 (1,282) 5
Amortization of deferred cost of
restricted common stock issued -- -- -- -- -- 991 991
Additional tax benefits from
stock plans -- -- 429 -- -- -- 429
Forfeitures of shares awarded
under the 1981 and 1990
restricted stock plans (34,720
shares) -- -- -- -- (198) 198 --
Exercise of stock options
awarded under the 1988 stock
option plan (32,000 shares) -- -- (39) -- 173 -- 134
---------- ------ ------- -------- -------- ------- --------
Balance, December 31, 1994 24,697,960 $2,470 $ 3,599 $130,715 $ (167) $(2,195) $134,422
---------- ------ ------- -------- -------- ------- --------
Add (Deduct):
Net income -- -- -- 22,811 -- -- 22,811
Dividends paid--$0.40 per share -- -- -- (9,923) -- -- (9,923)
Shares awarded under the 1990
and 1995 restricted stock
plans, (127,337 shares) 94,003 9 2,468 -- 220 (2,609) 88
Shares purchased under the 1995
employee stock purchase plan
(18,228 shares) 16,880 1 398 -- 17 -- 416
Amortization of deferred cost of
restricted common stock issued -- -- -- -- -- 1,329 1,329
Additional tax benefits from
stock plans -- -- 1,049 -- -- -- 1,049
Forfeitures of shares awarded
under the 1990 restricted stock
plan (6,245 shares) -- -- -- -- (72) 72 --
Exercise of stock options
awarded under the 1988 stock
option plan (25,000 shares) 24,665 3 146 -- 2 -- 151
---------- ------ ------- -------- -------- ------- --------
Balance, December 31, 1995 24,833,508 $2,483 $ 7,660 $143,603 $ -- $(3,403) $150,343
========== ====== ======= ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE> 31
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in Thousands
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 22,811 $ 33,460 $ 18,130
-------- -------- --------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 23,667 17,689 14,904
Unrealized and realized (gains) losses on venture capital and
marketable securities investments, net (9,345) 946 (3,468)
(Equity in earnings of) provision on other investments (438) (1,010) 778
Restricted stock plan expense 1,329 991 929
(Prepaid) deferred income taxes (2,404) (1,256) 9,625
Minority interest 3,123 2,129 1,409
Changes in operating assets and liabilities:
Receivable from securities brokers and dealers for sales of mutual
fund shares (4,979) 800 (5,131)
Receivables for gold shipments (1,017) (2,586) 772
Other receivables (2,547) 1 (6,599)
Mining inventory (3,724) (6,665) (1,971)
Other current assets (2,163) (1,800) 553
Other noncurrent assets (898) (143) (558)
Payable to funds for shares sold 5,294 (794) 5,114
Accrued expenses and accounts payable 6,695 3,188 2,551
Accrued employees' compensation 158 (928) 586
Accrued income taxes 1,470 (1,038) 1,569
-------- -------- --------
Total adjustments 14,221 9,524 21,063
-------- -------- --------
Net cash provided by operating activities 37,032 42,984 39,193
-------- -------- --------
Cash flows from investing activities:
Purchase of mining equipment and facilities (15,601) (16,147) (25,142)
Deferred mining development costs (959) (2,274) (278)
Additions to furniture, equipment and leasehold improvements (6,592) (6,195) (3,228)
Building in progress (7,909) -- --
Investments in marketable securities (4,546) (14,370) (42,980)
Proceeds from sale of marketable securities 4,124 22,720 37,892
Long-term venture capital investments (26,564) (4,134) (5,518)
Proceeds from sale of long-term venture capital investments 6,985 3,569 2,356
Deferred timber development costs (13,476) (7,388) (276)
Timber equipment and facilities (3,645) (4,485) --
Other investments (4,086) (3,130) (1,049)
Cost of acquisition in excess of net assets acquired (96) (470) (24,777)
Acquisition of Russian investment operations, net of cash acquired 4,180 -- --
Long-term investments (7,791) -- --
Proceeds from sale of long-term investments 8,935 -- --
-------- -------- --------
Net cash used in investing activities (67,041) (32,304) (63,000)
-------- -------- --------
Cash flows from financing activities:
Dividends paid (9,923) (7,771) (5,524)
Distributions to minority interestholder of gold mining subsidiary (350) -- --
Distributions to limited partners of venture capital subsidiary (11) (62) (119)
Employee stock purchase plan 416 -- --
Exercise of stock options 151 134 263
Restricted stock plan award 88 5 5
Dealer advances (14,913) (4,745) --
Borrowings 53,000 10,000 --
Amounts raised by venture capital investment partnerships 20,839 -- --
Issuance of notes payable -- -- 12,205
Repayments of notes payable (14,597) (6,592) (9,398)
Reclassification of restricted cash -- 2,227 608
-------- -------- --------
Net cash provided by (used in) financing activities 34,700 (6,804) (1,960)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 4,691 3,876 (25,767)
Cash and cash equivalents at beginning of year 23,118 19,242 45,009
-------- -------- --------
Cash and cash equivalents at end of year $ 27,809 $ 23,118 $ 19,242
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note 1--Nature of Operations and Organization
The Pioneer Group, Inc., and its subsidiaries (collectively, the "Company"), are
engaged in financial services businesses in the United States and several
foreign countries and in a number of natural resource development projects,
including a gold mining venture in the Republic of Ghana and three timber
ventures in the Russian Far East.
In the United States, the Company conducts four lines of financial services
businesses: (i) Pioneering Management Corporation ("PMC") serves as investment
manager to the 30 U.S. registered investment companies in the Pioneer Family of
Mutual Funds and several institutional accounts, (ii) Pioneer Funds Distributor,
Inc. ("PFD") serves as distributor of shares of the Pioneer Family of Mutual
Funds, (iii) Pioneer Capital Corporation ("PCC"), and its subsidiaries, engage
in venture capital investing and management activities, and (iv) Pioneering
Services Corporation serves as shareholder servicing agent for the Pioneer
Family of Mutual Funds.
The Company's international financial services businesses include investment
operations in: (i) Warsaw, Poland, where the Company manages and distributes
units of three mutual funds, owns 50% of a unitholder servicing agent and
manages an institutional venture capital fund, (ii) Dublin, Ireland, where the
Company distributes shares of, manages and services three offshore investment
funds, sold primarily in Western Europe, and (iii) Moscow, Russia, where the
Company provides financial services, including investment advisory, investment
banking and brokerage services, and where the Company owns 51% of the First
Voucher Fund, the largest Russian voucher investment fund. In addition, the
Company has investment operations in the Czech Republic and has invested in
investment management operations in India and Taiwan.
The Company's wholly owned subsidiary, Pioneer Goldfields Limited ("PGL"),
conducts mining and exploration activities in the Republic of Ghana and
exploration activities elsewhere in Africa. PGL's principal asset is its
ownership of 90% of the outstanding shares of Teberebie Goldfields Limited
("TGL"), which operates a gold mine in the western region of the Republic of
Ghana. The Republic of Ghana owns the remaining 10% of TGL. The Company also
participates in several natural resource development ventures in Russia,
including a project pursuing the development of timber production in the Russian
Far East, in which the Company has a 71% direct interest and a 3% indirect
interest.
Note 2--Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of the
Company, its wholly owned and majority-owned subsidiaries and certain
partnerships that the Company controls. The Company has consolidated the Pioneer
Ventures Limited Partnership II, Pioneer Poland U.S. L.P. and Pioneer Poland
U.K. L.P. in which the Company's ownership interest is 12.7%, 8% and 9%,
respectively. Control is defined by several factors, including, but not limited
to, the fact that the Company is the general partner, the general partner has
absolute and unilateral authority to make investment decisions, the limited
partners may not remove the general partner and the general partner has absolute
and unilateral authority to declare, or not declare, distributions of
partnership income to the partners. All material intercompany balances and
transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles. Consolidated
financial statements prepared in accordance with U.S. generally accepted
accounting principles require the use of management estimates. The most
significant estimates with regard to these consolidated financial statements
relates to venture capital investments, other investments and mining reclamation
costs, as discussed herein.
Certain reclassifications have been made to 1994 and 1993 amounts to conform
with the 1995 presentation.
Consolidated Statements of Cash Flows
Cash and cash equivalents consist primarily of cash on deposit in banks and
amounts invested in commercial paper, Pioneer money market mutual funds and U.S.
Treasury bills with original maturities of three months or less.
Income taxes paid were approximately $16,617,000, $16,440,000 and $5,106,000
in 1995, 1994 and 1993, respectively. In addition, $2,587,000, $1,329,000 and
$2,306,000 of interest was paid in 1995, 1994 and 1993, respectively. The amount
paid in 1995 includes approximately $1,800,000 of interest that was capitalized
related to the development of the Company's building in progress and Russian
timber operations.
The Company purchased 51% of the First Voucher Fund and certain Russian
investment operating entities for approximately $20 million. In conjunction with
the acquisition, liabilities were assumed as follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired $ 42,899
Cash paid (14,004)
--------
Liabilities assumed $ 28,895
========
</TABLE>
Recognition of Revenues
Investment management, shareholder services, trustee and other fees are
recorded as income during the period in which services are performed.
Agreements with certain of the Pioneer Family of Mutual Funds provide for fee
reductions, which are based on the excess of annual expenses of each mutual
fund over certain limits. Fee reductions are recorded on an accrual basis.
Underwriting commissions earned from the distribution of the Pioneer Family
of Mutual Fund shares and the systematic investment plan are recorded as
income on the trade (execution) dates.
Distribution fees are earned based on 0.75% of certain Pioneer Family of
Mutual Fund net assets.
The Company records sales of gold at sales value net of refining costs when
gold is shipped to a refinery.
The Company has purchased put options as "insurance" against significant
declines in the market price of gold below $310 per ounce. The put options
have been purchased in three- to nine-month incre-
30
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
ments from a bank, and the premium paid is amortized monthly. Unamortized
premiums are included in other current assets in the accompanying consolidated
balance sheets. The put options are in place for planned production in the
amount of 23,000 ounces per month up to March 31, 1996. The put options only
require an initial cash outlay (the premium amount), which amounted to
approximately $150,000, $405,000 and $488,000 for the years ended December 31,
1995, 1994 and 1993, respectively. Put options represent a right and not an
obligation. As such, the Company has neither ongoing exposure (other than credit
exposure) nor upside potential with respect to the put options. Should the
market price of gold decline below $310 per ounce, the Company would continue to
ship gold to refineries and exercise the put options, receiving payment for the
difference between the market price of gold and $310. These receipts would be
included as gold sales in the accompanying consolidated statements of income. As
of December 31, 1995, no put options have been exercised. It is the Company's
intention not to renew the put options after March 31, 1996 unless the price of
gold declines below $375 per ounce.
Public Offering Costs
Public offering costs consists of expenses incurred in connection with the
Company's postponed global offering of 20% of the shares of its gold
mining subsidiary PGL. The expenses relate primarily to marketing expenses and
the fees of professional advisers.
Building in Progress
Building in progress represents the construction of the International Business
Centre (IBC) in Russia. The IBC is an office building which will be leased upon
completion and is wholly owned by the First Voucher Fund. The Company owns a 51%
interest in the First Voucher Fund. At December 31, 1995, included in the
building in progress balance is capitalized interest of approximately $0.5
million.
Furniture, Equipment and Leasehold Improvements
Depreciation and amortization are provided for financial reporting purposes on a
straight-line basis over the following estimated useful lives: furniture and
equipment, 3-5 years, and leasehold improvements, over the term of the lease. In
the event of retirement or other disposition of furniture and equipment, the
cost of the assets and the related accumulated depreciation and amortization
amounts are removed from the accounts, and any resulting gains or losses are
reflected in earnings.
Mining Inventory
Gold bullion inventory and gold-in-process contained in the processing plant are
valued at the lower of cost or market.
Material and supplies are valued at the lower of average cost or replacement
cost.
Mining Equipment and Facilities
Processing plant and equipment is recorded at cost and is depreciated on a
units-of-production basis, which anticipates recovery over ten years or less.
Mining equipment (rolling stock) is recorded at cost and is depreciated on a
units-of-production basis which anticipates recovery over five years or less.
Buildings and housing units are recorded at cost and are depreciated on a
straight-line basis over five years.
Leach pads are recorded at cost and are depreciated on a units-of-production
basis.
All other equipment and facilities are recorded at cost and are depreciated
over their estimated useful lives on a straight-line basis ranging from three to
ten years. Depreciation begins at the time construction is completed and the
assets are placed into service.
Deferred Mining Development Costs
Deferred mining development costs, which include the cost of site development,
capitalized interest and infrastructure costs during the development and
construction phases of the project, are recorded at cost and amortized on a
units-of-production basis, which anticipates recovery over ten years or less.
Costs incurred to develop economically viable ore bodies, to further define
mineralization in existing ore bodies, or to secure rights to proven reserves
are capitalized as development costs.
Exploration costs associated with the initial identification of ore reserves
are expensed. Property and lease acquisition costs incurred in the process of
acquiring exploration mineral rights are expensed as incurred.
Mining Reclamation Costs
Estimated future reclamation costs are based principally on anticipated
environmental and regulatory requirements and are accrued and charged to expense
over the expected operating life of the mine on a units-of-production basis. The
accrual is maintained on an undiscounted basis.
Deferred Timber Development Costs
Deferred timber development costs principally consist of construction and
engineering expenditures incurred in developing the site, the jetty and roads,
capitalized interest (approximately $1.4 million in 1995), legal and
organizational costs.
Timber Equipment and Facilities
Timber equipment and facilities consist of logging machinery and building and
housing units.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is amortized on a straight- line basis
over five to fifteen years. The Company assesses the future useful life of these
assets whenever events or changes in circumstances indicate that the current
useful life has diminished. The Company considers the future undiscounted cash
flows of the acquired businesses in assessing the recoverability of this asset.
In connection with the purchase of the Russian investment operations in 1995
(see Note 13), the Company allocated cost in excess of net assets acquired in
the amount of $2,196,000.
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Cost in excess of net assets acquired, net, as reflected in the accompanying
consolidated balance sheets, consists of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
-------- ----------
(Dollars in thousands)
<S> <C> <C>
Mutual of Omaha Fund
Management Company $20,768 $22,789
Russian investment operations 2,050 --
Gold mining operations 1,966 2,341
-------- -------
$24,784 $25,130
======== =======
</TABLE>
Valuation of Long-Term Venture Capital Investments
The Company's long-term venture capital investments consist of the following (in
thousands):
<TABLE>
<S> <C>
Domestic $30,564
Non-U.S. 13,956
-------
$44,520
=======
</TABLE>
The Company's domestic venture capital investments are in companies that are
primarily engaged in bringing new technology to market as well as more mature
companies in need of capital for expansion, acquisitions, management buyouts or
recapitalizations. The Company's investments are primarily in the form of
unregistered common and preferred stock, warrants and promissory notes. Most
securities are valued at fair value, as determined in good faith by management
and approved by the Board of Directors, when market quotes are not available. Of
the total domestic venture capital value at December 31, 1995, the value of
securities for which market quotes are not available was $21,824,000. In
addition, total domestic venture capital investments included cash that has been
restricted for the future purchase of venture capital investments of $2,100,000.
In addition, non-U.S. venture capital investments are the investments held by
certain consolidated partnerships. These venture capital investments are in
companies that are domiciled in Poland. Of the total non-U.S. venture capital
value at December 31, 1995, the value of securities for which market quotes are
not available was $656,000. In addition, total non-U.S. venture capital
investments included cash that has been restricted for the future purchase of
venture capital investments of $13,300,000.
In determining fair value, investments are initially stated at cost until
significant subsequent events require a change in valuation. The Company
considers the financial condition and operating results of the investee, prices
paid in subsequent private offerings of the same or similar securities, the
amount that the Company can reasonably expect to realize upon the sale of these
securities, and any other factors deemed relevant. Securities for which market
quotations are available are valued at the closing price as of the valuation
date with an appropriate discount, if restricted.
Long-term Investments
Long-term investments consists mainly of Russian investments of the First
Voucher Fund. Given the fact that the markets in which these investments are
made and traded are not of the breadth and scope of the U.S. or other mature
markets, fair values are not readily determinable. Accordingly, the Company
values these investments at cost with adjustments for impairment, if needed.
Valuation of Financial Instruments
The Company considers the liquid nature and readily available market quotations
when estimating fair value of financial instruments. As stated in the
accompanying consolidated balance sheets, carrying values of the Company's
financial instruments approximate fair value.
Earnings Per Share
Earnings per share ("EPS") are based on the weighted average number of common
and common equivalent shares outstanding. Fully diluted EPS were not materially
different from primary EPS.
Stockholders' Equity
In 1994, the Company's Board of Directors approved a two-for-one stock split of
the Company's common stock payable in the form of a 100% stock dividend for
stockholders of record on December 1, 1994. A total of 12,348,980 shares of
common stock were issued in connection with this split. The stated par value of
each share was not changed from $0.10. A total of approximately $1,235,000 was
reclassified from the Company's additional paid-in capital account to the
Company's common stock account.
In 1993, the Company's Board of Directors approved a two- for-one stock split
of the Company's common stock payable in the form of a 100% stock dividend for
stockholders of record on September 1, 1993. A total of 6,174,490 shares of
common stock were issued in connection with the split. The stated par value of
each share was not changed from $0.10. A total of approximately $618,000 was
reclassified from the Company's additional paid-in capital account to the
Company's common stock account.
All share and per share amounts have been restated to retroactively reflect
the stock splits.
Foreign Currency Translation
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 52,
"Foreign Currency Translation," the "functional currency" for translating the
accounts of the Company's operations outside the U.S. is the U.S. dollar. This
includes the Company owned operations in highly inflationary economies. As a
result, all foreign currency gains and losses of these operations are included
in the consolidated statements of income. The impact on the consolidated
statements of income is immaterial.
Recent Pronouncement
In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No.
121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," which is to become effective for fiscal years beginning
after December 15, 1995. SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Statement also requires
that certain long-lived assets and identifiable intangibles to be disposed of be
reported at the lower of the carrying amount or
32
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
fair value less cost to sell. The Company anticipates that the application of
the new Statement will not have a significant impact on the results of
operations or financial condition upon adoption.
Concentration of Risk
The Company performs ongoing evaluations of its subsidiaries and investments and
obtains political risk insurance which mitigates its exposure in foreign
countries. Presently, the Company is in the process of applying for political
risk coverage relating to the Company's Russian investment operations, which
includes the First Voucher Fund.
Note 3--Mining Inventory
Mining inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
-------- ----------
(Dollars in Thousands)
<S> <C> <C>
Gold-in-process $ 1,485 $ 1,125
Materials and supplies 14,120 10,756
------- -------
$15,605 $11,881
======= =======
</TABLE>
Note 4--Mining Equipment and Facilities
<TABLE>
<CAPTION>
December 31,
1995 1994
-------- ---------
(Dollars in Thousands)
<S> <C> <C>
Mobile mine equipment $ 31,482 $ 26,958
Crusher 18,460 17,710
Processing plant and laboratory 4,911 4,775
Leach pads and ponds 15,726 10,026
Building and civil works 10,595 7,681
Office furniture and equipment 1,731 1,532
Motor vehicles 1,756 1,466
Construction in progress 3,161 1,010
Other assets 1,789 2,972
-------- --------
Total cost 89,611 74,130
Accumulated depreciation (42,631) (29,793)
-------- --------
$ 46,980 $ 44,337
======== ========
</TABLE>
Note 5--Income Taxes
The Company adopted the accounting and disclosure rules specified by SFAS No.
109, "Accounting for Income Taxes," as of January 1, 1993. There was no impact
to results of operations as a result of the adoption; therefore, the Company
elected to adopt this statement without restatement to prior periods.
The following is a summary of the components of income before provision for
federal, state and foreign income taxes for financial reporting purposes:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ --------
(Dollars in Thousands)
<S> <C> <C> <C>
Domestic $10,957 $ 9,408 $10,426
Foreign 28,452 38,234 24,026
------- ------- -------
$39,409 $47,642 $34,452
======= ======= =======
</TABLE>
The components of the provision for federal, state and foreign income taxes
consist of:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -------
(Dollars in Thousands)
<S> <C> <C> <C>
Current:
Federal $ 260 $ 3,076 $ 3,135
State 68 1,246 1,171
Foreign 18,674 12,228 1,223
Deferred (Prepaid):
Federal 4,072 93 533
State 1,438 46 165
Foreign (7,914) (2,507) 10,095
------- ------- -------
$16,598 $14,182 $16,322
======= ======= =======
</TABLE>
Income taxes, as stated as a percentage of income before provision for
federal, state and foreign income taxes, are comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 34.0% 34.0%
Increases (decreases) in
tax rate resulting from:
State income tax (net of
effect on federal
income tax) 2.5 2.0 2.6
Foreign income taxes 1.7 (8.0) 7.4
Minority interest tax
effect 2.7 1.5 1.6
Unbenefited foreign
losses 0.7 0.7 0.9
Other, net (0.5) (0.4) 0.9
---- ---- ----
Effective tax rate 42.1% 29.8% 47.4%
==== ==== ====
</TABLE>
In 1994, the Republic of Ghana reduced the income tax rate for mining
companies from 45% to 35%. As a result, the Company's 1994 earnings were
enhanced by 16 cents per share, on 90% of a $4.4 million reduction in income
taxes deferred since the commencement of TGL's commercial operations in April,
1991 through December 31, 1993.
The amount and components of the net deferred tax liability recognized in the
accompanying consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- ----------
(Dollars in Thousands)
<S> <C> <C>
Deferred tax assets $ 4,284 $ 3,103
Deferred tax liabilities (17,292) (2,679)
Deferred foreign tax liabilities (1,495) (17,331)
-------- --------
$(14,503) $(16,907)
======== ========
</TABLE>
The approximate income tax effect of each type of temporary difference is as
follows:
33
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Deferred taxes related to foreign
mining operations $ (7,472) $(17,331)
Deferred development costs 218 424
Foreign tax credit 491 837
Deferred rent 426 387
Restricted stock 658 474
Nondeductible reserves 264 277
Dealer advances (7,040) (1,771)
Prepaid insurance (109) (158)
Venture capital and other
investments (2,336) (357)
Other temporary differences, net 397 311
-------- --------
$(14,503) $(16,907)
======== ========
</TABLE>
U.S. Federal income taxes have been provided on all foreign earnings except
for the amount considered to be permanently invested outside the U.S. which
approximates $26,773,000 at December 31, 1995.
Note 6--Stock Plans
The Company records stock compensation in accordance with APB 25. The Company
has a Restricted Stock Plan ("the 1995 Plan") to provide incentives to certain
employees who have contributed and are expected to contribute materially to the
success of the Company and its subsidiaries. An aggregate total of 600,000
shares of the Company's stock may be awarded to participants under the 1995 Plan
at a price to be determined by the Board of Directors, generally $0.10 per
share. The 1995 Plan expires in 2000. The Company's 1990 Restricted Stock Plan
(the "1990 Plan") expired in January 1995. The Company's 1981 Restricted Stock
Plan (the "1981 Plan") expired in January 1990. The 1995 Plan, the 1990 Plan and
the 1981 Plan are collectively referred to as the "Plans."
The following tables summarize restricted stock plan activity for the Plans in
1995.
<TABLE>
<CAPTION>
Unvested Shares
----------------------------------------------------
1995 Plan 1990 Plan 1981 Plan Total
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at 12/31/94 -- 419,264 15,684 434,948
Awarded 3,937 123,400 -- 127,337
Vested (3,337) (134,450) (15,684) (153,471)
Forfeited -- (6,245) -- (6,245)
------ -------- --------- ---------
Balance at 12/31/95 600 401,969 -- 402,569
====== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Vested Shares
----------------------------------------------------
1995 Plan 1990 Plan 1981 Plan Total
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at 12/31/94 -- 219,000 1,489,648 1,708,648
Vested 3,337 134,450 15,684 153,471
----- ------- -------- ----------
Balance at 12/31/95 3,337 353,450 1,505,332 1,862,119
===== ======= ========= ==========
</TABLE>
The Company awarded 101,460 shares in 1994 and 164,800 shares in 1993 under
the 1990 Plan.
The participant's right to sell the awarded stock under the Plans is
generally restricted as to 100% of the shares awarded during the first two
years following the award, 60% during the third year and 20% less each year
thereafter. The Company may repurchase unvested restricted shares at $0.10
per share upon termination of employment.
Awards under the Plans are compensatory, and accordingly, the difference
between the award price and the market value of the shares under the Plans at
the award date, less the applicable tax benefit, is being amortized on a
straight-line basis over a five-year period.
The Company also maintains the 1988 Stock Option Plan ("the Option Plan"),
pursuant to which options on the Company's stock may be granted to key
employees of the Company. The Company has reserved an aggregate of 2,400,000
shares for issuance under the Option Plan. Both incentive stock options
intended to qualify under Section 422A of the Internal Revenue Code of 1986
and non-statutory options not intended to qualify for incentive stock option
treatment ("non-statutory options") may be granted under the Option Plan. The
Option Plan is administered by the Board of Directors or a committee of
disinterested directors designated by the Board ("the Committee"), and unless
the Option Plan is terminated earlier, no option may be granted after August
1, 1998. The option price per share is determined by the Board of Directors
or the Committee, but (i) in the case of incentive stock options, may not be
less than 100% of the fair market value of such shares on the date of option
grant, and (ii) in the case of non-statutory options, may not be less than
90% of the fair market value on the date of option grant. Options issuable
under the Option Plan become exercisable as determined by the Board of
Directors or the Committee not to exceed ten years from the date of grant.
Options granted to date vest over five years at an annual rate of 20% on each
anniversary date of the date of grant.
The following table summarizes the Option Plan activity for the three years
ended December 31, 1995:
<TABLE>
<CAPTION>
Number of Exercise
shares price per share
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1992 1,570,800 $ 4.188-$ 7.063
Granted 139,000 $12.00
Terminated (12,000) $ 4.188
Exercised (62,800) $ 4.188
--------- ---------------
Outstanding at December 31, 1993 1,635,000 $ 4.188-$12.00
--------- ---------------
Granted 191,500 $ 15.875-$21.25
Exercised (32,000) $ 4.188
--------- ---------------
Outstanding at December 31, 1994 1,794,500 $ 4.188-$21.25
--------- ---------------
Granted 207,500 $ 26.50-$ 27.50
Exercised (25,000) $ 6.00-$ 6.125
--------- ---------------
Outstanding at December 31, 1995 1,977,000 $ 4.188-$27.50
========= ===============
</TABLE>
At December 31, 1995, 1,272,900 shares were vested and unexercised under the
Option Plan.
On May 4, 1995, the Company adopted the 1995 Employee Stock Purchase Plan (the
"1995 Purchase Plan"), which qualifies as an "Employee Stock Purchase Plan"
within the meaning of Section 423 of the Internal Revenue Code of 1986. An
aggregate total of 500,000 shares of common stock have been authorized for
issuance under the 1995 Purchase Plan, to be implemented through one or more
offerings, each approximately six months in length
34
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
beginning on the first business day of each January and July. The price at which
shares may be purchased during each offering will be the lower of (i) 85% of the
closing price of the common stock as reported on the NASDAQ National Market (the
"closing price") on the date that the offering commences or (ii) 85% of the
closing price of the common stock on the date the offering terminates. In 1995,
the Company issued 18,228 shares under the 1995 Purchase Plan.
Note 7--Net Capital
As a broker-dealer, the Company is subject to the Securities and Exchange
Commission's ("SEC") regulations and operating guidelines which, among other
things, require the Company to maintain a specified amount of net capital, as
defined, and a ratio of aggregate indebtedness to net capital, as defined, not
exceeding 15 to 1. Net capital and the related ratio of aggregate indebtedness
to net capital may fluctuate on a daily basis. The Company's net capital, as
computed under Rule 15c3-1, was $3,155,294 at December 31, 1995 and $5,652,825
at December 31, 1994, which exceeded required net capital of $979,036 by
$2,176,258 at December 31, 1995 and $611,817 by $5,041,008 at December 31, 1994.
The ratio of aggregate indebtedness to net capital at December 31, 1995 was 4.65
to 1 and at December 31, 1994 was 1.62 to 1.
The Company is exempt from the reserve requirements of Rule 15c3-3, since its
broker-dealer transactions are limited to the purchase, sale and redemption of
redeemable securities of registered investment companies. All customer funds are
promptly transmitted and all securities received in connection with activities
as a broker-dealer are promptly delivered. The Company does not otherwise hold
funds or securities for, or owe money or securities to, customers.
Note 8--Benefit Plans
The Company and its subsidiaries have two defined contribution benefit plans for
eligible employees: a retirement benefit plan and a savings and investment plan
("the Benefit Plans") qualified under Section 401 of the Internal Revenue Code.
The Company makes contributions to a trustee, on behalf of eligible employees,
to fund both the retirement benefit and the savings and investment plans. The
Company's expenses under the Benefit Plans were $1,930,000 in 1995, $1,562,000
in 1994 and $1,566,000 in 1993.
Both of the Company's qualified Benefit Plans described above cover all
full-time employees who have met certain age and length-of-service requirements.
Regarding the retirement benefit plan, the Company contributes an amount which
would purchase a certain targeted monthly pension benefit at the participant's
normal retirement date. In connection with the savings and investment plan,
participants can voluntarily contribute up to 8% of their compensation to the
plan, and the Company will match this contribution up to 2%.
Note 9--Related Party Transactions
Certain officers and/or directors of the Company and its subsidiaries are
officers and/or trustees of the Pioneer Family of Mutual Funds and the Company's
international mutual funds. Investment management fees earned from the mutual
funds were approximately $60,832,000 in 1995, $62,206,000 in 1994 and
$38,194,000 in 1993. Underwriting commissions and distribution fees earned from
the sales of mutual fund shares were approximately $8,515,000 in 1995,
$12,768,000 in 1994 and $7,609,000 in 1993. Shareholder services fees earned
from the mutual funds were approximately $22,447,000 in 1995, $19,820,000 in
1994 and $17,071,000 in 1993.
Within the Pioneer Family of Mutual Funds, total revenues from Pioneer II were
approximately $32,244,000 in 1995, $31,237,000 in 1994 and $30,489,000 in 1993,
and total revenues from Pioneer Fund were approximately $16,431,000 in 1995,
$15,281,000 in 1994 and $14,434,000 in 1993.
Certain partners of Hale and Dorr, the Company's legal counsel, are officers
and/or directors of the Company and its subsidiaries. Amounts paid to Hale and
Dorr consist of legal fees of approximately $1,587,000 in 1995, $1,461,000 in
1994 and $1,233,000 in 1993.
Hale and Dorr is a partner in the law firm Brobeck Hale and Dorr
International. The Company paid legal fees in the amount of approximately
$1,355,000 in 1995 to Brobeck Hale and Dorr International. Legal fees for 1994
and 1993 paid to Hale and Dorr include immaterial legal fees paid to Brobeck
Hale and Dorr International.
At December 31, 1994, the Company had a receivable from an officer for
$109,000. This receivable was fully paid in 1995.
Note 10--Commitments
U.S. rental expense for 1995, 1994 and 1993 amounted to approximately
$3,007,000, $2,571,000 and $2,378,000, respectively. Future minimum payments
under the leases amount to $3,138,000 in 1996, $3,212,000 in 1997, $3,303,000 in
1998, $3,425,000 in 1999, $3,280,000 in 2000 and $5,537,000 thereafter. These
future minimum rental payments include estimated annual operating and tax
expenses of approximately $1,416,000.
Rental expense for the Polish Mutual Fund operations amounted to approximately
$863,000, $562,000 and $201,000 in 1995, 1994 and 1993, respectively. The lease
is open-ended and can be terminated by either the Company or the lessor upon 90
days notice.
In February 1996, a dividend of $0.10 per share was declared (aggregating
approximately $2,500,000) to each shareholder of record on March 1, 1996, paid
on March 11, 1996.
The Company is contingently liable to the Investment Company Institute Mutual
Insurance Company for unanticipated expenses or losses in an amount not to
exceed $500,000. Two thirds of this amount is secured by an irrevocable standby
letter of credit with a bank.
In September 1995, the Overseas Private Investment Corporation ("OPIC")
executed a commitment letter with TGL and the Company pursuant to which OPIC
agreed, subject to the fulfillment of certain conditions, to finance up to $54
million in connection with the Phase III expansion. Such commitment expires on
May 1, 1996. As of March 11, 1996, TGL and the Company have not
35
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
executed definitive loan agreements with respect to such OPIC guaranteed
financing and there can be no assurance that such OPIC guaranteed financing will
become available, or that it will be available on terms acceptable to TGL and
the Company. In order to facilitate financing, TGL has obtained credit approval
from Caterpillar Financial Services Corporation, a wholly owned subsidiary of
Caterpillar Inc. (collectively, "Caterpillar"), pursuant to which Caterpillar
has agreed, subject to the fulfillment of certain conditions, to provide a
revolving credit facility of up to $21 million to finance the purchase of
Caterpillar and other mining equipment. Such revolving facility would be subject
to renewal in January 1997. In March 1996, TGL executed a commitment letter to
utilize $8.4 million of such facility. There can be no assurance that TGL will
be able to obtain the Caterpillar credit facility on terms favorable to TGL or
the Company. On March 6, 1996, TGL executed a loan agreement with Enskilda, a
division of Skandinaviska Enskilda Banken, pursuant to which Enskilda has agreed
to provide a direct loan of Swedish Krona 94.5 million (approximately $13.6
million) to finance the gyratory crusher and related equipment procured from
Svedala Crushing and Screening AB. This loan is guaranteed by the Swedish Export
Credits Board. As TGL obtains these alternative sources of financing, TGL
intends to proportionately reduce the amount of its OPIC guaranteed financing.
The Company is committed to additional capital contributions of $2.1 million
to Pioneer Poland U.S. L.P. and $1.5 million to Pioneer Poland U.K. L.P. These
contributions are payable in three annual installments commencing in 1996. At
December 31, 1995, the Company was committed to additional capital contributions
of $2.5 million to Pioneer Ventures Limited Partnership II, a U.S. venture
capital fund.
The Company acts as a passive, non-bank trustee for retirement plan accounts.
IRS regulations and operating guidelines allow a passive, non-bank trustee to
accept fiduciary accounts only if the trustee's net worth (determined as of the
end of the most recent taxable year) exceeds the greater of (1) $100,000 or (2)
two percent of the net assets of fiduciary accounts. At December 31, 1995, the
Company's net worth of $150.3 million was 3.4% of the net assets of fiduciary
accounts.
Note 11--Notes Payable
Notes payable of the Company consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
-------- ----------
(Dollars in Thousands)
<S> <C> <C>
Lines of Credit $52,000 $10,000
Small Business Administration ("SBA")
financing, notes payable to a bank,
interest payable semi-annually at
rates ranging from 6.12% to 9.8%,
principal due in 1998 through 2003 4,950 4,950
Note payable to a bank, guaranteed by
the Swedish Export Credits Guarantee
Board, principal payable in
semi-annual installments of $812,000
through March 31, 1997, interest payable
at 5.77%, secured by equipment 2,436 4,059
Notes payable to a bank, guaranteed by
OPIC, interest payable quarterly at
approximately 0.5% in excess of 91-day
T-bill rate set in advance -- 1,544
Note payable to a bank, guaranteed by
the Company, principal payable in
semi- annual installments of $214,000
through November 30, 1999, no interest
payable, secured by equipment 1,715 2,145
Preferred shares financing related to
the Russian investment operations,
principal payable in three annual
installments of $2,000,000 through
April 1998, interest payable at 5% 6,000 --
-------- -------
67,101 22,698
Less: Current portion (56,053) (13,597)
-------- -------
$ 11,048 $ 9,101
======== =======
</TABLE>
The Company received approval from a bank in September 1994 for a $10
million line of credit. The Company paid interest under such line at either
Prime less 0.5% or LIBOR (30, 90 or 180 days) plus 1.25%. The weighted
average interest rate on the line of credit outstanding was 7.6% in 1994.
On February 28, 1995, the Company entered into an agreement with a commercial
bank providing for a $30 million unsecured line of credit. Advances under the
line bear interest, at the Company's option, at (a) the higher of the bank's
base lending rate or the federal funds rate plus 0.50%, (b) LIBOR plus 1.10%, or
(c) at a money market rate set by the bank. The line, which expires on April 30,
1996, provides that the Company must pay additional interest to the bank at the
rate of 0.25% per annum of the unused portion of the line. On May 22, 1995, the
Company entered into a second agreement with the commercial bank providing for
an additional $10 million unsecured line of credit with substantially the same
terms as the first agreement, including applicable interest rates and expiration
date. This second line was subsequently increased to $15 million on October 20,
1995, to $30 million on December 20, 1995, and to $40 million on February 27,
1996. At March 11, 1996, the Company had $61.5 million outstanding under the
lines. The weighted average interest rate on the lines of credit outstanding was
7.1% in 1995.
The Company entered into a commitment letter agreement on February 29, 1996
with the commercial bank for a new senior credit facility in the amount of $115
million. Such commitment is subject to the fulfillment of certain conditions and
expires on April 30, 1996. Under the proposed new facility, the Company can
borrow up to $35 million under a revolving credit agreement ("RCA") to finance
dealer advances relating to sales of back-end load shares of the Company's
domestic mutual funds. See Note 14 below for further discussion on dealer
advances. The RCA is subject to annual renewal by the Company and the commercial
bank. In the event the RCA is not renewed, at maturity, it will automatically
con-
36
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
vert to a five-year term loan. Advances under the RCA bear interest, at the
Company's option, at (a) the higher of the bank's base lending rate or the
federal funds rate plus 0.50% or (b) LIBOR plus 1.25%. In addition, the Company
can borrow up to $80 million for general corporate purposes and to refinance
existing debt. This loan is payable in full in five years from the first
drawdown. Advances under this loan bear interest, at the Company's option, at
(a) the higher of the bank's base lending rate or the federal funds rate plus
0.50% or (b) LIBOR plus the applicable margin, of either 0.75%, 1.25% or 1.50%
as defined under the commitment letter. The senior credit facility provides that
the Company must pay additional interest to the bank at the rate of 0.375% per
annum of the unused portion of the facility and an annual arrangement fee of
$35,000. The commitment fees are approximately $0.7 million.
In 1994, TGL prepaid a note payable to a supplier and a note payable to a bank
with a remaining principal balance of approximately $761,000.
Maturities of notes payable at December 31, 1995 for each of the next five
years and thereafter are as follows (dollars in thousands):
<TABLE>
<S> <C>
1996 $56,053
1997 3,241
1998 3,629
1999 428
2000 1,500
Thereafter 2,250
-------
$67,101
=======
</TABLE>
Note 12--Major Customers
During the year ended December 31, 1995, gold sales aggregated $90.2 million.
During 1995, gold shipments from TGL in Ghana to two unaffiliated European
refiners accounted for $51.0 million and $39.2 million, respectively,
representing 100% of such total sales.
During the year ended December 31, 1994, gold sales aggregated $67.6 million.
During 1994, gold shipments from TGL in Ghana to two unaffiliated European
refiners accounted for $43.6 million and $24.0 million, respectively,
representing 100% of such total sales.
During the year ended December 31, 1993, gold sales aggregated $59.2 million.
During 1993, gold shipments from TGL in Ghana to two unaffiliated European
refiners accounted for $52.4 million and $6.8 million, respectively,
representing 100% of such total sales.
Note 13--Acquisitions
Russian Investment Operations
On April 11, 1995, the Company completed its acquisition of the First Voucher
Fund and related financial entities. The Company financed the acquisition
through the use of its lines of credit in the amount of approximately $14
million and the issuance of preferred share financing in the amount of $6
million. Results of operations are included in the accompanying consolidated
statements of income commencing April 11, 1995. This transaction was accounted
for under the purchase method. Pro forma results of operations have not been
presented since the amounts are not material to the consolidated financial
statements.
Mutual of Omaha Fund Management Company
On December 1, 1993, the Company completed its acquisition of Mutual of Omaha
Fund Management Company ("FMC"). The Company financed the acquisition through
working capital. Results of operations are included in the accompanying
consolidated statements of income commencing December 1, 1993. This transaction
was accounted for under the purchase method. Pro forma unaudited results of
operations assuming the acquisition had occurred on January 1, 1993 are as
follows (dollars in thousands except per share amounts):
<TABLE>
<CAPTION>
1993
---------
<S> <C>
Revenues $144,935
Net income $ 19,306
Earnings per share $ 0.77
</TABLE>
Note 14--Dealer Advances
Certain of the Pioneer Family of Mutual Funds maintain a multi-class share
structure, whereby the participating funds offer both the traditional front-end
load shares and back-end load shares (B-shares). B-shares do not require the
investor to pay any sales charge unless there is a redemption before the
expiration of the minimum holding period which ranges from three to six years.
However, the Company pays upfront sales commissions (dealer advances) to
broker-dealers ranging from 2% to 4%. The participating Funds pay the Company
distribution fees of 0.75% and service fees of 0.25%, per annum of their
respective net assets, subject to annual renewal by the participating Fund's
Board of Trustees. In addition, the Company is paid a contingent deferred sales
charge (CDSC) on B-shares redeemed within the minimum holding period. The CDSC
is paid based on declining rates ranging from 2% to 4%. The Company capitalizes
and amortizes dealer advances for book purposes over periods which range from
three to six years depending on the participating Fund. The Company deducts the
dealer advances in full for tax purposes in the year such advances are paid.
Distribution and service fees received by the Company from participating Funds
are recorded in income as earned. CDSC received by the Company from redeeming
shareholders reduce unamortized dealer advances directly. In 1995 and 1994, the
Company paid dealer advances in the amount of $14.9 million and $4.7 million,
respectively. The Company introduced C-shares for certain of the Pioneer Family
of Mutual Funds in 1996.
37
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 15--Financial Information by Business Segment
Total revenues and income (loss) before income taxes by business segment,
excluding intersegment transactions, were as follows (dollars in thousands):
<TABLE>
<CAPTION>
Mutual Fund Venture
Investment Underwriting Capital Shareholder
Management and Other Investments Services Gold Mining
----------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Revenues and sales $66,874 $ 17,261 $ 1,833 $22,507 $90,242
======= ======== ======= ========= ==========
Income (loss) before income taxes $42,333(1) $(24,683)(2) $ 3,014(3) $ 1,785 $22,558(4)
======= ======== ======= ========= ==========
Depreciation and amortization $ 1,444 $ 5,917 $ 109 $ 1,782 $15,744
======= ======== ======= ========= ==========
Capital expenditures $ 8,259 $ 3,068 $ 63 $ 3,111 $15,601
======= ======== ======= ========= ==========
Identifiable assets at December
31, 1995 $73,103 $ 63,772 $56,430 $ 7,819 $81,512
======= ======== ======= ========= ==========
Year ended December 31, 1994:
Revenues and sales $64,677 $ 18,983 $ 574 $19,884 $67,584
======= ======== ======= ========= ==========
Income (loss) before income taxes $44,465 $(19,363) $(2,362)(3) $ 3,601 $21,713(4)
======= ======== ======= ========= ==========
Depreciation and amortization $ 870 $ 3,721 $ 86 $ 1,029 $12,961
======= ======== ======= ========= ==========
Capital expenditures $ 245 $ 3,095 $ 11 $ 2,575 $16,147
======= ======== ======= ========= ==========
Identifiable assets at December
31, 1994 $33,456 $ 36,164 $26,408 $ 5,656 $75,666
======= ======== ======= ========= ==========
Year ended December 31, 1993:
Revenues and sales $40,259 $ 12,295 $ 546 $17,152 $59,151
======= ======== ======= ========= ==========
Income (loss) before income taxes $27,813 $(15,631) $ 509(3) $ 3,418 $20,184(4)
======= ======== ======= ========= ==========
Depreciation and amortization $ 842 $ 1,069 $ 85 $ 775 $13,062
======= ======== ======= ========= ==========
Capital expenditures $ 947 $ 1,293 $ 29 $ 959 $25,142
======= ======== ======= ========= ==========
Identifiable assets at December
31, 1993 $42,359 $ 36,398 $25,755 $ 4,157 $61,893
======= ======== ======= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Other Consolidated
------- ------------
<S> <C> <C>
Year ended December 31, 1995:
Revenues and sales -- $198,717
======= ========
Income (loss) before income taxes $(5,598)(5) $ 39,409
======= ========
Depreciation and amortization -- $ 24,996
======= ========
Capital expenditures $ 3,645 $ 33,747
======= ========
Identifiable assets at December
31, 1995 $36,433 $319,069
======= ========
Year ended December 31, 1994:
Revenues and sales -- $171,702
======= ========
Income (loss) before income taxes $ (412)(5) $ 47,642
======= ========
Depreciation and amortization $ 13 $ 18,680
======= ========
Capital expenditures $ 4,754 $ 26,827
======= ========
Identifiable assets at December
31, 1994 $24,735 $202,085
======= ========
Year ended December 31, 1993:
Revenues and sales -- $129,403
======= ========
Income (loss) before income taxes $(1,841)(5) $ 34,452
======= ========
Depreciation and amortization -- $ 15,833
======= ========
Capital expenditures -- $ 28,370
======= ========
Identifiable assets at December
31, 1993 $ 1,733 $172,295
======= ========
</TABLE>
(1) Net of minority interest of approximately $1,291 for the year ended
December 31, 1995.
(2) Net of minority interest and interest expense related to third parties of
approximately $158 and $344, respectively for the year ended December 31,
1995.
(3) Net of minority interest and interest expense related to third parties of
approximately ($133) and $402 for the year ended December 31, 1995, $9 and
$457 for the year ended December 31, 1994 and $175 and $337 for the year
ended December 31, 1993.
(4) Net of minority interest, interest expense related to third parties, and
interest expense related to the Company of approximately $1,807, $278 and
$0, respectively, for the year ended December 31, 1995, $2,120, $548 and $0,
respectively, for the year ended December 31, 1994 and $1,234, $690 and
$289, respectively, for the year ended December 31, 1993.
(5) Net of public offering costs of approximately $4,863 in 1995; net of
interest expense related to third parties and expenses related to the
Company of $300 and $977 for the year ended December 31, 1994 and $1,361 and
$608 for the year ended December 31, 1993. These expenses, excluding the
public offering costs, were related to the Company's Russian ventures.
38
<PAGE> 41
INFORMATION RELATING TO SHARES
The Company's common stock is quoted on the NASDAQ National Market under the
symbol PIOG. At March 1, 1996, the Company had approximately 4,000 shareholders.
The price range of the common stock and the dividends paid to shareholders
during each quarter of the last two years were as follows:
<TABLE>
PRICE RANGE OF COMMON STOCK*
<CAPTION>
1995 1994
-------------------- ---------------------
High Low High Low
--------- ------- ------- ---------
<S> <C> <C> <C> <C>
January--March $21-11/16 $18-1/4 $21-5/8 $12-11/16
April--June 28-3/4 20-7/8 21 18-1/8
July--September 29-1/4 26-7/8 24-1/2 18-1/4
October--December 29-3/8 23-1/4 25-3/8 21-1/4
<FN>
* Prices reflect the closing price of the Company's common stock on the
NASDAQ National Market.
</TABLE>
<TABLE>
DIVIDENDS ON COMMON STOCK
<CAPTION>
Per Share
Record Date Payable Date Amount**
- ----------------- ------------------ ---------
<S> <C> <C>
March 1, 1994 March 10, 1994 $.06
June 1, 1994 June 10, 1994 .075
September 1, 1994 September 9, 1994 .08
December 12, 1994 December 19, 1994 .10
March 1, 1995 March 9, 1995 .10
June 1, 1995 June 9, 1995 .10
September 1, 1995 September 8, 1995 .10
December 1, 1995 December 8, 1995 .10
March 1, 1996 March 11, 1996 .10
<FN>
** Adjusted for December 1, 1994 2-for-1 stock split effected in the form of
a 100% dividend.
</TABLE>
39
<PAGE> 42
THE PIONEER GROUP, INC. AND SUBSIDIARIES
60 State Street, Boston Massachusetts 02109
<TABLE>
<CAPTION>
Directors and Executive Officers*
<S> <C>
Philip L. Carret, Trustee Emeritus of certain of the Pioneer Family of Mutual Funds; Founder Chairman Director of Carret
& Company.
John F. Cogan, Jr., Chairman of the Board, President and Trustee or Director of each of the Pioneer
Chairman of Family of Mutual Funds; President and Director of Pioneer Omega, Inc., Pioneer First
the Board, Russia, Inc., Pioneer International Corporation and Pioneer Metals and Technology,
Director and Inc.; Director of Pioneer Capital Corporation, Pioneer Management (Ireland) Limited,
President Joint-Stock Company Pioneer Investments and Pioneering Services Corporation; Chairman
of the Board and Director of Pioneering Management Corporation, Pioneer Funds
Distributor, Inc., Joint-Stock Company Pioneer Metals International, Joint-Stock
Company Forest Starma, Teberebie Goldfields Limited and Pioneer Goldfields Limited;
Chairman of the Supervisory Board of Pioneer Fonds Marketing GmbH; Member of the
Supervisory Board of Pioneer First Polish Trust Fund Joint Stock Company S.A. and
Pioneer Czech Investment Company, A.S.; and Partner, Hale and Dorr.
Robert L. Butler, President and Director of Pioneer Funds Distributor, Inc.; Director of Pioneering
Director and Management Corporation, Pioneering Services Corporation, Pioneer International
Executive Corporation and Pioneer Management (Ireland) Limited; Vice Chairman of Supervisory
Vice President Board of Pioneer Fonds Marketing GmbH; and Member of Supervisory Board of Pioneer First
Polish Trust Fund Joint Stock Company S.A. and Pioneer Czech Investment Company, A.S.
Maurice Engleman, President of E.T. Software, Professional Equity Corporation and Marketing Two, Inc.; and
Director Principal, Engleman & Associates.
Jaskaran S. Teja, Senior Vice President of Pioneer International Corporation; and Director of Joint-Stock
Director Company Forest Starma and Pioneer Goldfields Limited.
David D. Tripple, Executive Vice President and Trustee or Director of each of the Pioneer Family of
Director and Mutual Funds; President and Director of Pioneering Management Corporation; Director
Executive of Pioneer Capital Corporation, Pioneer International Corporation, Pioneer Management
Vice President (Ireland) Limited, Joint-Stock Company Pioneer Investments and Pioneer Funds
Distributor, Inc.; Member of Supervisory Board of Pioneer First Polish Trust Fund
Joint Stock Company S.A. and Pioneer Czech Investment Company A.S.; Director and Vice
President of Pioneer Omega, Inc.; and Director of Pioneer First Russia, Inc.
John H. Valentine, Director of Pioneer Capital Corporation; Director of Entrepreneurial Management of
Director Health Policy Institute; Director of Visualization Technology, Inc.; Trustee of
Hurricane Island/Outward Bound School and Thompson Island Outward Bound Education
Center; and Chairman of the Board of Boston University Medical Center Hospital.
William H. Keough, Treasurer of each of the Pioneer Family of Mutual Funds; and Treasurer of Pioneering
Senior Vice Management Corporation, Pioneering Services Corporation, Pioneer Capital Corporation,
President, Pioneer Funds Distributor, Inc., Pioneer International Corporation, Pioneer Metals
Chief Financial and Technology, Inc., and Pioneer Omega, Inc.
Officer
and Treasurer
Timothy T. Frost, Director and Vice President of Pioneer Omega, Inc. and Pioneer First Russia, Inc.; and
Vice President Senior Vice President of Pioneer International Corporation.
Lucien Girard, III Managing Director and Chief Executive of Pioneer Goldfields Limited; Managing
Vice President Director of Teberebie Goldfields Limited; and Director of Pioneer Metals and Technology,
Inc.
Stephen G. Kasnet, President of Pioneer Real Estate Advisors, Inc.
Vice President
John F. Lawlor, Vice President of Pioneering Management Corporation; and Director of Pioneer Goldfields
Vice President Limited, Teberebie Goldfields Limited, Pioneer Management (Ireland) Limited,
Joint-Stock Company Pioneer Metals International and Joint-Stock Company Forest
Starma.
Alicja K. Malecka, President of Pioneer First Polish Trust Fund Joint Stock Company S.A. and Pioneer
Vice President Investment Poland Ltd.; Senior Vice President of Pioneer International Corporation; and
Member of Supervisory Board of Pioneer Czech Investment Company, A.S.
Frank M. Polestra, President and Director of Pioneer Capital Corporation and Pioneer SBIC Corp.
Vice President
William H. Smith, Jr., President and Director of Pioneering Services Corporation; Director and Vice
Vice President President of Pioneer International Corporation; Director of Pioneer Management
(Ireland) Limited; and Member of Supervisory Board of Pioneer Czech Investment
Company, A.S.
Joseph P. Barri, Secretary of each of the Pioneer Family of Mutual Funds and the Company's
Secretary subsidiaries; and Partner, Hale and Dorr.
Robert P. Nault, Assistant Secretary of each of the Pioneer Family of Mutual Funds and the Company's
General Counsel and subsidiaries.
Assistant Secretary
Legal Counsel Transfer Agent Independent Public Accountants
Hale and Dorr State Street Bank and Trust Company Arthur Andersen LLP
Boston, Massachusetts Boston, Massachusetts Boston, Massachusetts
</TABLE>
* As defined pursuant to Section 16 of the Securities Exchange Act of 1934.
40
<PAGE> 43
[Pioneer Logo]
The Pioneer Group, Inc.
60 State Street
Boston, Massachusetts 02109
[Recycle Logo]
Printed on Recycled Paper
0396-3215
Pioneer Funds Distributor, Inc.
<PAGE> 1
Exhibit 21
----------
<TABLE>
THE PIONEER GROUP, INC.
DIRECT AND INDIRECT SUBSIDIARIES
<CAPTION>
Name Jurisdiction of Organization
- ---- ----------------------------
<S> <C>
Pioneering Management Corporation State of Delaware
Pioneer Funds Distributor, Inc. Commonwealth of Massachusetts (1)
Pioneering Services Corporation Commonwealth of Massachusetts
Pioneer Capital Corporation Commonwealth of Massachusetts
Pioneer Associates, Inc. Commonwealth of Massachusetts (2)
Pioneer SBIC Corp. Commonwealth of Massachusetts (2)
Pioneer Plans Corporation State of Delaware
Pioneer Metals and Technology, Inc. State of Delaware
Pioneer Investments Corporation Commonwealth of Massachusetts
Pioneer Goldfields Limited Guernsey, Channel Islands (11)
Glencar Explorations (U.K.) Limited United Kingdom (3)
Teberebie Goldfields Limited Republic of Ghana (3)
Pioneer International Corporation State of Delaware
Pioneer Fund Management Company State of Nebraska
Pioneer Fonds Marketing GmbH Germany (4)
Pioneer First Polish Trust Fund Joint-Stock Company Poland (5)
Joint-Stock Company Pioneer Metals International Russian Federation (6)
Joint Stock Company Pioneer Investments Russian Federation (7)
Pioneer Investment Poland, Ltd. Poland (5)
Pioneer Ventures Limited Partnership Commonwealth of Massachusetts (8)
Joint-Stock Company Forest-Starma Russian Federation (9)
Pioneer Management (Ireland) Limited Ireland
Pioneer Exploration Limited Delaware
Pioneering Management (Jersey) Ltd. Channel Islands (5)
Pioneer Poland U.S. (Jersey) Ltd. Channel Islands (5)
Pioneer Poland U.K. Ltd. United Kingdom (5)
Pioneer Czech Investment Co. a.s. Czech Republic (5)
Pioneer Goldfields Trustees Limited Guernsey Channel Islands (3)
Pioneer Real Estate Advisors, Inc. State of Delaware
Pioneer Goldfields Holdings, Inc. State of Delaware
Lobengula Exploration and Mining Company
(Private Limited) Zimbabwe (3)
Pioneer Omega, Inc. State of Delaware
Pioneer First Russia, Inc. State of Delaware (10)
Luscinia, Inc. State of Delaware (10)
Theta Enterprises, Inc. State of Delaware (10)
Pioneer Forest, Inc. State of Delaware
PioGlobal Corporation State of Delaware
First Voucher Fund Russian Federation (12)
Pioneer Securities Russian Federation (13)
Pioneer Services Russian Federation (13)
Joint Stock Company Management Company (KUIF) Russian Federation (13)
First Voucher Bank Russian Federation (14)
Joint Stock Company Udinskoye Russian Federation
Joint Stock Company Amgun-Forest Russian Federation
</TABLE>
<PAGE> 2
__________________
1 Pioneer Funds Distributor, Inc. is a wholly-owned subsidiary of Pioneering
Management Corporation.
2 Pioneer Associates, Inc. and Pioneer SBIC Corp. are wholly owned
subsidiaries of Pioneer Capital Corporation.
3 Teberebie Goldfields Limited is a 90% owned subsidiary and Glencar
Explorations (U.K.) Limited, Lobengala Exploration and Mining Company (Private
Limited) and Pioneer Goldfields Trustees Limited are wholly owned subsidiaries
of Pioneer Goldfields Limited.
4 Pioneer Fonds Marketing GmbH is a wholly owned subsidiary of Pioneer Funds
Distributor, Inc.
5 Pioneer First Polish Trust Fund Joint Stock Company, Pioneer Investment
Poland, Ltd., Pioneering Management (Jersey) Ltd., Pioneer Poland U.S.
(Jersey) Ltd., Pioneer Poland U.K. Ltd. and Pioneer Czech Investment Co. a.s.
are wholly owned subsidiaries of Pioneer International Corporation.
6 Joint-Stock Company Pioneer Metals International is a wholly owned subsidiary
of Pioneer Metals and Technology, Inc.
7 Joint-Stock Company Pioneer Investments is a 55% owned subsidiary of The
Pioneer Group, Inc.
8 Pioneer Ventures Limited Partnership is an 89.5% owned subsidiary of Pioneer
SBIC Corp.
9 Joint-Stock Company Forest Starma is a 74% owned subsidiary of The Pioneer
Group, Inc. (71% direct and 3% indirect).
10 Pioneer First Russia, Inc., Luscinia, Inc. and Theta Enterprises, Inc. are
wholly owned subsidiaries of Pioneer Omega, Inc.
11 Pioneer Goldfields Limited is a wholly owned subsidiary of Pioneer
Goldfields Holdings, Inc.
12 First Voucher Fund is a 20% owned subsidiary of Theta Enterprises, Inc. and
a 31% owned subsidiary of Luscinia, Inc.
13 Pioneer Securities, Pioneer Services and Joint Stock Company Management
Company (KUIF) are wholly owned subsidiaries of Pioneer First Russia, Inc.
14 First Voucher Bank is a 70% owned subsidiary of Joint Stock Company
Management Company (KUIF) and a 20% owned subsidiary of First Voucher Fund.
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference in this Form 10-K of our report dated March 11, 1996
included in Registration Statement File Nos. 33-61932, 33-59185 and 33-59183.
It should be noted that we have not audited any financial statements of the
Company subsequent to December 31, 1995 or performed any audit procedures
subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.00000
<CASH> 27,809
<SECURITIES> 7,630
<RECEIVABLES> 31,880
<ALLOWANCES> 0
<INVENTORY> 15,605
<CURRENT-ASSETS> 91,219
<PP&E> 134,304
<DEPRECIATION> (53,189)
<TOTAL-ASSETS> 319,069
<CURRENT-LIABILITIES> 98,538
<BONDS> 0
<COMMON> 2,483
0
0
<OTHER-SE> 147,860
<TOTAL-LIABILITY-AND-EQUITY> 319,069
<SALES> 0
<TOTAL-REVENUES> 198,717
<CGS> 0
<TOTAL-COSTS> 158,908
<OTHER-EXPENSES> (624)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,024
<INCOME-PRETAX> 39,409
<INCOME-TAX> 16,598
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,811
<EPS-PRIMARY> 0.900
<EPS-DILUTED> 0.900
</TABLE>
